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HMRC have made a call that is likely to please any working taxpayer who uses an iPhone or one its rivals for his or her job.
The department has updated its view on the interpretation of ITEPA 2003, s 319, which explains what can considered to be a mobile phone and therefore exempt from income tax in respect of the provision of one per employee without transfer of ownership. Smartphones are to come within the definition for the first time.
Gadgets like Apple’s app-packed bestseller had been excluded because they were seen by the Revenue as not being designed, or adapted, for the primary purpose of transmitting and receiving spoken messages. They were therefore treated as a taxable benefit to any worker provided with a smartphone and allowed to use it personally.
The change in the taxman’s stance follows a significant increase in the number of smartphones in the UK. The communications regulator Ofcom recently estimated that quarter of all adults in the country own such a device.
The revised view by HMRC also means many iPhone and BlackBerry wielding workers will be able to reclaim tax back to 2007/08.
‘Smartphones can cost upwards of £400, so employees who have had one for several years could potentially claim back £200 or £300,’ explained Chris Lee, tax partner at accountants James Cowpe.
He praised the Revenue for having ‘finally found itself in the 21st century’, and added, ‘Smartphones are in many cases an indispensable business tool, and it is right they should not be treated as a taxable benefit.’
To qualify for a refund employees will have to show they were provided with a single smartphone and that it was owned by their employer, who treated the device for tax purposes as not being a mobile phone and declared it as being a taxable benefit, either on form P11D or through a PAYE settlement.
Deloitte partner Phill Everson said, ‘Enterprise mobility is quickly evolving and businesses will appreciate this tax change... However, the ongoing challenges are the security and technology to extend business functionality to smartphones and protect sensitive data.’
The revised rules do not apply to tablet computers and similar mobile gadgets that provide only voice over internet protocol, such as the Skype service, for sending and receiving spoken communication.
However, by mid-2015 the software will no longer support Windows XP due to CRA upgrading its security after the Heartbleed bug last year.