Both individuals and employers may now be able to reclaim tax and NIC after HMRC alter their view on the tax status on ‘smartphones’.
Tax status of the ’smartphone’
Historically, HMRC have considered that the provision of a single mobile phone per employee can be regarded as tax exempt. However until now, HMRC have taken the view that ‘smartphones’ would not fall within that tax exemption on the basis that their main function was not to make and receive calls.
Significant advances in technology have led to the increase in the number of ‘smartphones’ in the UK and following representations made to HMRC, HMRC have responded by accepting that the provision by the employer of Personal Digital Assistant (PDA) devices such as Blackberry and iPhone should not give rise to a taxable benefit.
Employees who were provided with a single ‘smartphone’ which has been reported as a taxable benefit may now be able to claim a tax refund back to 2007/08. Employers may seek a refund on Class 1A national insurance contributions (“NICs”).
This change will not apply to tablet computers such as the iPad, laptop computers or any similar mobile devices that are not principally designed for voice communication via a telephone network.
HMRC’s changed view is to be welcomed by employers and employees. Many employers may now wish to consider providing additional ‘smartphones’ to employees through salary sacrifice arrangements now there is potential for tax and NICs savings.