Tax consequences of bring your own device (BYOD)

Tax consequences of bring your own device (BYOD)

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I've been looking into HMRC's position on bring your own device (BYOD) policies. This is where employees provide their own IT equipment for business use (ideally in exchange for some cash). Despite it being a fairly hot topic the internet seems pretty scarce on the tax implications.

The one bit of guidance most articles point to is:

"Money an employer pays to an employee to use their own mobile phone is taxable." - Section 319 of http://www.hmrc.gov.uk/guidance/480.pdf

So no explicit mention of laptops though presumably the same would apply. 

Does anyone have any practical experience. One would have thought that the above position might not be totally sustainable, has it ever gone to court?

Tim

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By twj4789
11th Jun 2012 19:28

Classification

HMRC has just increased the amount that can be paid to an employee for working at home to £4.00 per week without the need for bills etc. to back the claim up. (This is providing the employee can prove that duties can be done from home).

It doesnt specifically mention use of home assets, but is there to pay for additional costs in relation to the home working. If the employee is working from home for all or part of their duties are they claiming through this?

Otherwise if I were making the judgement then I would use the same classification as the mobile phone. It is likely the employee would own a laptop even if they didn't use it for work, in a similar way they would have a mobile.

 

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By Steve Kesby
11th Jun 2012 20:28

Capital allowances

An employee that incurs capital expenditure (including deemed expenditure when it's brought into use) on equipment that they use in their employment will qualify for capital allowances (probably an AIA).

Surely this provides a tax deceleration for the employee?

It's completely sustainable S.62 ITEPA 2003 says that the employment tax charge arises on "any other profit...obtained by the employee...if it's money, or money's worth".

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By TimCaprica
11th Jun 2012 22:13

Thank you both. Interesting to get your views. 

Steve - In what way is the employee making a profit? If you take the position that it's something they have anyway and they are now getting money for it then okay there is no marginal cost but wouldn't it be more reasonable (unhelpful word perhaps) to say the cost is based on proportional usage just like the benefit would be if the situation was reversed.

Interesting comment on capital expenditure. It would be difficult to implement though if BYOD is to be a widespread practice and therefore that's unsustainable in a different way.

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By eyeskyward
26th Jul 2012 12:52

Assets made available for mixed business and private use

Since the removal of s320 (aka Home Computing Initiative) many suppliers and employers have utilised EIM21630: Assets placed at the disposal of a director or employee to provide computer benefits to employees. By establishing a tax treatment and PAYE reporting methodology with HMRC, employers can then choose to apply a salary sacrifice. Depending on HMRC's view of arrangements the employee can be taxed on the value of the asset rather than service. (AKA 20% rule).

A Salary Sacrifice will automatically deliver NI savings (as it is a reduction in cash pay), but an application of a tax treatment can also be preferential. The tax treatment of a loaned asset would be at a lower effective rate than the equivalent tax rate due on cash pay...To be clear, this is not really a tax saving, rather a recognition that loan of a company asset has less taxable value than cash. (HMRC recognising that the asset has less worth than the cash and no ownership).

Mobile Phones and Smart Phones get a clearer treatment as they are defined under s319. A company can loan a phone at a defined tax rate as opposed to a 20% proportion of the asset. Although, there is nothing stopping a company from treating a handset as an asset under EIM21630 and ignoring mobile phone service charges. 

The interesting thing is that BYOD has a very clear business intent and purpose. Indeed a companies intent for offering a BYOD is entirely for work purposes and as such private use is incidental. As such, an argument can be made that the devices provided under BYOD for work purposes are tax exempt, although this would require treatment as company assets...So Bring "YOUR OWN" device, is a bad term to consider.

HM Treasury, HMRC and Cabinet Office do seem to be at the wrong side of the curve on BYOD. Whilst Liam Maxwell has recognised the cost saving advantages, they seem not to have grasped the most significant opportunity for HMRC.

A clear tax policy on BYOD could move large amounts of tax exempt devices bought by companies into a shared ownership model. Were this to occur, then HMRC could collect tax where it previously did not. 

In 2006, the Home Computing Initiative was valued by the HCI Alliance at £450 Million. Add to this a large number of SME firms, Corporate Entities and Public Sector Organisations that would embrace a BYOD (to save on Blackberry costs alone) and you create a big collection for Treasury.

20% VAT on £450 Million would be no small drop in the pan. To be clear very few SMEs ran HCI...

Another consideration is Lease Finance. A companies credit rating will improve where it meets lease payments...As BYOD collects from existing wages bills, it greases the credit rating wheels for small business.

Perhaps when we are beyond the Olympics we may see a sensible review of the numbers and policy?

 

 

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