HMRC changes stance on smartphones

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BlackBerrys, iPhones and other smartphones will no longer be viewed as benefits in kind, following a change of heart from HMRC.

On Monday, HMRC announced that it had changed its interpretation of the legal definition of “telephone apparatus” to include mobile phones and smartphones. The announcement was made public in Revenue & Customs Brief 02/12, 'Employment income - definition of mobile phone (treatment of smartphones)'. As a result, employers will no longer need to record smartphones on P11Ds, nor pay Class 1A NICs on the supposed benefits of the smartphones. The brief notes that many employers have already ceased doing so under separate provisions, but those who have done so, and their employees could seek refunds on amounts paid going back to 2007-08.

When the Finance Act 2006 was upgraded to exempt mobile phone use from tax, HMRC did not consider multimedia-equipped smartphones to qualify. Under the department’s new interpretation of s316 of the Income Taxes (Earnings and Pensions) Act 2003  there will be no assessment of a benefit in kind if the employer provides a single device whose sole purpose is to allow an employee to perform their job, on the condition that private use is not significant. For more technical detail on this exemption see the Employment Income Manual at EIM21611 and for the changes introduced relating to mobile phones, see EIM21779.

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About John Stokdyk

John Stokdyk is the global editor of AccountingWEB UK and


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24th Feb 2012 14:02

Are they handling this right?

I understand that HMRC have a difficult job to do, and when they discover they have got something wrong it must be tricky to decide how to admit this to the public. However I feel that they are being rather mealy mouthed about smartphones.

Their manuals were pretty clear that "Blackberry devices" weren't primarily phones and so didn't qualify for the exemption. Yet brief 02/12 implies that most employers have ignored their advice and so their change of heart isn't that important. They also try to make light of their original misguided view by saying that smartphones emerged onto the market in late 2007 -  were they living in a time warp because I, clients and friends of mine where using them in mid 2006.

If as they say it isn't a big issue - and I accept it isn't - why take such a protective approach. They should just say "we got it wrong and if you followed our advice you can reclaim any tax and National Insurance overpaid as a result." And I have more to say on this point.

Shouldn't they be offering a refund without time limit? Their change of mind isn't, as far as I'm aware, the result of a reinterpretation of the law, it's because they can't sustain what was a faulty point of view from the outset.

Finally; while I'm not certain on this point, aren't class 1A overpayments still subject to a six year time limit and not four years Reg 55 SS Contribution Regulations?

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By stirfry
24th Feb 2012 23:03

Because HMRC want small business to use them

As a developer I received this from HMRC on 10/2/12


In enabling customers to meet their record keeping responsibilities we need to harness new technology to meet the 2011/12 HMRC remit from the Exchequer Secretary to the Treasury - 'digital is the default position'.

To meet this aim HMRC's intent is to encourage a catalogue of smart phone apps aimed at a target population of small and medium sized enterprises, business start ups, and those who submit 3 line accounts (3LA) to help with their record keeping.


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27th Feb 2012 10:33

More obvious reason...

This would have cost our MPs and the Civil Servants money, and we cannot have that!!!!

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27th Feb 2012 12:24

Blackberries being used by HMRC staff...

Certainly over the last year I have been with tax inspectors who have Blackberries.  Wonder whether they were taxed as a BIK?

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28th Feb 2012 12:31

You guys are SO cynical!

But I bet you're right!

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By cfield
28th Feb 2012 23:41

Were never taxable benefits anyway

Even without the mobile phone exemption, most Blackberries and smartphones would have qualified for the same exemption as any other type of "computer equipment" (as HMRC insisted on calling them). Provided they were issued as tools of the job and there was no "significant" private use, they were not taxable benefits.

As most are obviously necessary for the job and it was well nigh impossible for even employers to police private use, let alone HMRC, I can't see that many firms would have declared them on P11Ds anyway, unless they had over-zealous accountants or compliance officers.

A step in the right direction anyway, even though they couldn't bring themselves to admit they were wrong.


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