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Taxable benefit PDA & Hands Free

The guidance re Handsfree kit bought by employee, reimbursed by employer and employee retains ownership say this is taxable, but do they mean the employer pays class 1A NIC only via P11D or does this have to go through the Payroll and Tax and EE NIC deducted at source as well as put on P11D and showing that the tax and NIC has been deducted likewise for mobile cill costs over and above business use Payroll and P11D or just P11D and tax code next year adjusted.

Also a number of employees have been given Blackberry's and I can not say that the personal use is insignificant or quantitfy it as they use them as their personal and business phones, how do I calculate the benefit seeing as these count as computers and not mobiles.  I understand the 20% of market value (inc VAT) but is the total cost of the bill counted as the costs to run it (rental and data charges) or just the data charges which enable the 'computer' element of the phone to be used.  If it is the whole bill it would be extremely high simply for having the ability to receive email.

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25th Oct 2010 14:32

a knotty problem indeed

Section 319 of the Income Tax (Earnings and Pensions) Act 2003 specifically removes any liability for income tax on the provision of a mobile phone that is placed at the disposal of an employee or a member of the employee's family or household. The exemption applies to the telephone itself, to the rental and call charges met by the employer under a contract between the employer and the service provider and, if the phone is installed in a car, van or heavy goods vehicle, to any associated hands-free kit and installation costs.

There is no condition imposed relating to the extent of the use of the mobile phone for private use. The exemption applies if it is provided exclusively for private use.

However, there are a number of other situations where the exemption does not apply.

If the mobile phone provided by the employer can be given up by the employee in exchange for a higher wage or salary, even if the employee does not take up the cash option, it is liable for tax on its "money's worth", i.e. the amount that would be paid in lieu of the benefit. The benefit is reported in Section A of form P11D, or Section A(2) of form P9D..

 If the employer provides a non-cash voucher to obtain a mobile phone, or a "pay-as-you-go" voucher to pay for the cost of the phone calls, there is a tax charge based on the cost to the employer in providing the voucher, and a liability for Class 1 NICs at the time the voucher was provided. The benefit is reported in Section C of form P11D, Section B of form P9D..

 If the employer buys the mobile phone and gives or sells it to the employee so that ownership is transferred to the employee, the benefit is valued according to the market value of the phone at the time ownership is transferred and the amount is reported in Section A of form P11D. There is no P9D reporting requirement for lower-paid employees, i.e. those with an earnings rate of less than £;8,500..

 If the mobile phone belongs to the employee and the employer reimburses the employee's costs in acquiring the phone, the payment must be made through the payroll and both tax and NICs deducted..

 If the mobile phone belongs to the employee and the employer pays the employee's personal bills direct to the service provider, the amount paid is reported in Section B of form P11D or Section A(2) of form P9D. A liability for Class 1 NICs arises at the time the payment is made..

 If the mobile phone belongs to the employee and the employer reimburses the employee's business call charges only, the payment is reported in Section N of form P11D. There is no P9D reporting requirement for lower-paid employees. There is no liability for Class 1 NICs. (A dispensation would avoid the reporting requirement here.).

 If the mobile phone belongs to the employee and the employer reimburses the employee's private call charges, the payment is reported in Section N of form P11D or Section A of form P9D. A liability for Class 1 NICs arises at the time the payment is made.

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Phone or computer?

 

The tax rules treat mobile phones and computers provided to employeesdifferently. If a mobile phone is provided then a tax benefit will not arise onthe employee, whether they make personal calls on the mobile phone or not.

If a computer is provided for purely business purposes then no benefit will arise on the employee. However if there is significant private use of the computer then a benefit in kind will arise.

The issue you have here is that HM Revenue & Customs would argue that the smart phones supplied to employess are in fact computers. For the phone to be treated as a mobile phone it must have been designed primarily for transmitting and receiving spoken messages.

Things like a Blackberry or an iPhone are considered to be computers by HM Revenue & Customs.

The problem is that if they are classed as a computer then there is a chance of the employee being liable to tax on the phone, depending upon the amount of private use.

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26th Oct 2010 16:50

Thanks James

But what if the personal use can not be quantified, as it was primarily issued for business use could a reasonable proportion of the call charges be assesed only otherwise it is rather unfair on the employee, especially when it is only private CALLS that are the issue and if these hasn't have been blackberry's there would be no charge, the actual email facility on the phone (which is all that would be used other than calls & txt - employee not allowed to browse internet etc on the phones) would be business.

If someone works usually 5 days out of 7 days would 2/7th be reasonable as private use or would it need to be the full 100% of the total bill, or could it be argued that because the computer facility is totally business that the private calls are incidental and there is no benefit

Still not sure on the handsfree kit bit though. Employee owns kit but has claimed it back in expenses (they will continue to retain ownership) so should i pay the full amount and thats it or should i pay full amount back and then their salary  adjusted to reflect the PAYE/NIC due on the reimbursement or just leave it and put on P11d for coding notice to be adjusted

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