Providing broadband to employees

BIK

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A client currently provides business broadband to customers for their offices. They are considering approaching some of their larger customers to see if they would offer it to their staff also for their home. Many of their clients are considering closing their offices with their staff WFH, it is important to their customers that their staff have quality broadband at home.

A standard home broadband is usually say £25

The cost of them providing business grade broadband is more like £50 so the question of the BIK has obviously arisen. There will of course be private use of the broadband. The £50 is roughly split as follows:

£25 broadband

£5 to cover fast track support (so if there is a technical problem the service provider will ensure a call out within 24 hours, to reduce down time for employees)

£20 router - The business routers are far more expensive than your standard home router. Your std router probably costs £20 compared to £250 for a business router

If the employee is a HR tax payer they are barely better off as the £20 tax charge is only £5 lower than their current cost. In order to reduce this, I wonder if HMRC would agree to the following:

£5 support fee solely relates to business and therefore shouldnt be included

£20 router is much more expensive than a personal standard router, so some/all shouldnt be included as BIK. If this wouldnt work, could the ownership of the router be with the employer and so it could be classed as the provision of business equipment which belongs to an employer and should be returned by the employee?

Would appreciate any thoughts on this and what is the process in agreeing this (if possible), bearing in mind it is not for one particular client. 

Replies (6)

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By Anonymous.
05th Oct 2020 20:05

SA2016 wrote:

If the employee is a HR tax payer they are barely better off as the £20 tax charge is only £5 lower than their current cost.

So the employee gets a superior service all round and saves £5 pm and that's a problem?

If the employee doesn't want a benefit in kind they can simply opt to have the business service and then pay for their own for private use.

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By Duggimon
06th Oct 2020 10:56

While the costs are needed only because there is business use of the broadband, it doesn't follow that those costs are solely business costs.

I would say the whole cost of the broadband is subject to a BIK charge based on the percentage of private use.

The support provided and the improved router will both result in a better experience when watching Netflix at the end of the day as well as making working from home feasible, I don't think you can separate out any of the costs.

However, as it's been pointed out, the worker is still quids in with a £5 saving for a better service, so I don't see the issue.

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By SA2016
06th Oct 2020 17:26

Thank you both, I think my client was hoping as part of his sell to his clients that the saving maybe more than £5 a month!

Is there anyway to discuss this type of scenario with HMRC?

If the router is owned by the company should this not be excluded or I assume this wont work because as with a laptop the use would need to be predominantly business use

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By The Dullard
07th Oct 2020 09:56

The benefit is calculated at the marginal cost of providing it (Pepper v Hart). If the business broadband is needed for business use it is exempt under s 316, as is any incidental private use. If the private use is more than incidental, then you use marginal cost to calculate the benefit, which is probably then £0.

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Replying to The Dullard:
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By SA2016
07th Oct 2020 14:27

Thanks, but it is not the employer who actually provides the broadband, they are using an external provider (my client)?

How is it best to speak to HMRC on this?

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Replying to SA2016:
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By The Dullard
07th Oct 2020 15:13

Your chances of speaking to anybody intelligent at HMRC are remote to nil.

I was talking about the marginal cost to the employer.

Either:

employer is saying "we need you to work from home, but your personal broadband doesn't cut it, so we're going to pay for you to have commercial quality broadband." In that case the cost of the broadband is for business purposes and there is no marginal cost (to the employer) of the employee's personal use is nil. or

employer is saying "we need you to work form home, but your personal broadband doesn't cut it, so you need to have commercial quality broadband installed. We've arranged a deal with provider X and we will reimburse the installation costs and additional monthly costs (over your existing personal supply) of the broadband. The reimbursements aren't taxable.

What am I not misunderstanding? I am sure that this can be structured with no adverse tax impact for the employees.

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