HMRC published guidance on 20 February 2012 stating that smartphones will now qualify as mobile phones rather than be treated as computer equipment. This means that smartphones provided to employees for personal use without a transfer of ownership should not give rise to a benefit in kind.
Previously HMRC treated Blackberries and iPhones as falling within the category of computer equipment, which could give rise to a taxable benefit. Tablet devices such as iPads, laptops and notebooks are still included in this category.
Computer equipment lent by an employer to an employee, which is used by the employee for private purposes, may result in a taxable benefit. If the employee is a lower paid employee and is not a director the benefit should be tax free. In any other case there may be a benefit of the higher of:
- 20% of the market value of the asset at the time it was first made available to the employee; and
- The sums paid by the employer in providing the asset by way of hire charge.
If the employee makes a contribution to the employer for the use of the asset, that contribution can be deducted from the above amount.
If computer equipment is provided to the employee solely for business use, there should not be a taxable benefit, even where there is some private use, so long as that private use is not significant. HMRC do not provide a definition of what is and is not significant. It should be accepted that any private use by the employee is not significant where an employer communicates an electronic usage policy to the employee. This can be either through the employment contract or by asking the employee to sign a statement acknowledging the company policy, and also the company makes a commercial decision not to recover costs of private use in a commercial use because it would be impractical to do so.
For further information on tax free benefits call the Taxdesk on 0845 4900 509 and ask for Priya Dutta.