HMRC and SmartphonesSaturday, February 25th, 2012
HMRC issued a Brief this month concerning their previous and their revised thoughts on the treatment of a smartphone when this is provided by employer to employee.
There is much that could be written about the relevant sections under the Income Tax (Earnings and Pensions) Act 2003 and what led to HMRC’s revised thinking about how these ‘phones should be treated for P11D purposes. However, this can all be put very simply as follows:
- Previous thinking was that smartphones (‘iPhones’, ‘Blackberry’ etc) were not mobile ‘phones and were subject to tax via the P11D
- HMRC now accept that their thinking was incorrect and that smartphones satisfy the criteria to be classified as mobile ‘phones and should be treated as such for P11D reporting purposes. This means:
- Where one mobile (or SIM) is provided by the employer, the contract is between employer and provider and it is available for both business and personal use, there is no reporting obligation, therefore no tax or NICs liability
- From 2011/12p, do not report a smartphone on the P11D if it meets the above criteria
- If smartphones have been declared previously back to 2007/08 tax years, the employee will be entitled to a refund of the tax paid on the benefit and the employer a refund of the Class 1A NICs
Very simply again, there is no difference between a smartphone and mobile ‘phone for reporting purposes to HMRC. For 2011/12 P11Ds, there is no need to report smartphones if they have been provided as a mobile ‘phone. If they have been declared previously back to 2007/08, HMRC will refund the tax to the employee and the Class 1A NICs to the employer. However, this has to be applied for by writing to HMRC with:
- Names and NINOs for any employee who has been affected
- Confirmation of the benefit reported on the P11D and the tax year to which it relates
- Confirmation of where this was reported on the P11D
- Details of the make and model of the smartphone
- The original Class 1A NICs payable (i.e. including the smartphone)
- The revised Class 1A NICs payable (i.e. after the smartphones have been removed from the P11D(b))
Please read the full brief if you are one of the few employers that HMRC believe have been affected by this change in their thinking.
The relevant HMRC material will be updated in due course, including the Booklet 480.