<b>Budget 2006:</b> Home Computer Initiative ended by new benefit in kind rules for mobiles and PCs. By John Stokdyk

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The Home Computing Initiative, through which employers are able to subsidise employees's purchase of computer systems, has been effectively closed by a Budget crackdown on electronic benefits in kind.

The HCI scheme introduced in the 1999 Finance Act will cease with effect from 6 April, an HMRC spokeswoman confirmed.

The exemption allowing employees to borrow personal computers from their employers for home use free of any tax liability as a benefit in kind will be changed, along with simlar provisions covering mobile phones set out in Budget Note 30 Exemptions For Computers & Mobile Phones

For computers, section 320 of Income Tax (Earnings and Pensions) Act 2003 the benefits in kind exemption currently applies to the first 500 of the hardware cost. There is currently no limit to the number o...

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By Taxi
23rd Mar 2006 16:03

If you are an employer this does not stop you providing
your employee a computer for business use, and the same applies to lap tops.

It will be very hard for an employer to prevent any private use of a laptop/pc, and i do not for one minute think that people should be worrying about the benefits implications of playing the odd computer game in your lunch hour, or answering the odd email, if you have been leant a PC under a home working initiative.

It makes sense for any employers who have loaned pcs up until now to gift them to the employees concerned. The gift will be the market value of the second hand pc.

Employers who are lending pcs under homeworking arrangements need to ensure that these arrangements are rock solid and in the employment contracts. This saves future hassle from over zealous PAYE inspectors.

Thanks (0)
23rd Mar 2006 16:31

HMRC postion on pre 6 April HCI schemes seems unclear. On the one hand some HMRC people are saying there is a two week window to get an HCI scheme in place. Other spokespersons are suggesting that only those employees in HCI schemes prior to the Budget announcement will, by concession, be able to remain in their existing HCI schemes post 6 April and retain the computer tax concession. The latter view rules out new scheme implementation in the next two weeks.

Apparently HMRC staff have a Budget Q&A on their intranet for handling callers.

Advice on employer provided computers post 6 April indicates that where the employer provides employees with computers purely for business use from 6 April, there will be no taxable benefit arising where any "private use" of the computer is "incidental". Unfortunately, "incidental" has not been defined or quantified by HMRC. Similarly, where the employer provides a computer for both business and private use, a tax benefit charge will arise where any private use is "significant". Again, there is no definition or quantification of what is considered to be "significant"

Thanks (0)
23rd Mar 2006 19:05

HMRC view of "not significant"
The HMRC Employment Income Manual says this about "Not significant private use" at para 21613:

"Not significant" is not defined in statute. Provided that:
· the employer’s policy about private use is clearly stated to the employees and sets out the circumstances in which occasional private use may be made and
· any decision of the employer not to recover the costs of private use is a commercial decision because the administrative costs of doing so would exceed the amounts involved, rather than a desire to reward the employee and
· there are reasonable checks to ensure that the employer’s policy is followed in practice

you should accept that the test is met.
In other circumstances, whether private use is not significant will depend on the facts of the case. Do not spend time arguing the point where only trivial amounts are involved.
Employers are not expected to keep detailed records of every instance of actual private use in order to substantiate a claim for exemption."

Thanks (0)
24th Mar 2006 15:26

HCI Statement from HMRC
Now on HMRC website

"Transitional arrangements for Home computer schemes.

Following the Chancellor's budget announcement abolishing the tax exemption on the provision by employers of computer equipment for private use with effect from 6 April 2006, in response to a number of enquiries, HMRC confirm that anybody who has had a computer made available for private use before 6 April 2006 will not be affected by the change. If an employee entered into an HCI scheme arrangement with their employer before 6 April 2006, and under that arrangement the employer is committed to provide a computer to the employee, but for reasons beyond their control the employee cannot take physical possession of the computer until 6 April or later, HMRC accepts that the computer exemption will apply to the provision of that computer."

Thanks (0)
23rd Mar 2006 15:38

Existing arrangements
If a computer has been loaned prior to 6/4/06, will it become a taxable BIK from that date or will the exemption continue to apply for arrangements made on or before 5/4/06.

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