Mobile phones and tax charges...

Posted by on 20 January 2012 | 0 Comments

Dains are warning both employers and employees to examine tax rules on the use of mobile phones and similar devices so they are not being left out of pocket.

Andy McQuillan, Tax Partner at Dains said: “In principle, if an employee makes an asset available for an employee’s private use there is a charge to tax. Ignoring special cases like vans and cars, assets are liable to a “benefit in kind” tax charge on 20% of its initial market value. If the annual cost to the employers of renting or hiring the asset is more than 20% of the market value, the tax charge is based on the rent or hire payment.

“Mobile phones are different however, as an employer can make available one mobile phone (including call charges) to each employee without giving rise to a tax charge.

“HMRC defines a mobile phone as a device used for talking to people – thus ‘personal digital assistants’ such as smart-phones will, in principle, give rise to a tax charge because they additionally have functions associated with a computer.”

The mobile phone exemption also only applies where the phone is owned (or rented) by the employer – it does not apply where the employee himself contracts with the operator even if reimbursed all or part of the cost by the employer.

However, Andy McQuillan notes that there is no tax charge on anything which is provided for the sole purpose of carrying out the duties of the employment and which is not in fact used to any significant extent for any private purpose.

So, the provision of a smart-phone gives rise to no tax charge if used only for business purposes. No tax charge will also rise if the employer reimburses mobile phone charges only to the extent of business usage.

For more information please contact Andy McQuillan on 0845 555 8844 or email: tax@dains.com

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