20 February 2012

HMRC is announcing a change of view on the interpretation of s319(4) ITEPA 2003 and now accepts that smartphones satisfy the conditions to qualify as 'mobile phones'.

Revenue & Customs Brief 02/12 is relevant to those employers that have:

  • provided just one smartphone to their employees without transfer of ownership and
  • treated that smartphone as a device that falls outside the meaning of 'mobile phone' for the purposes of the exemption in section 319 Income Tax (Earnings and Pensions) Act 2003 ('ITEPA 2003') and
  • included entries in form P11D and form P11D(b) for the benefit of the availability and use of that smartphone and for the corresponding Class 1A NIC liability (or included the benefit in a PAYE Settlement Agreement)

Instances where all three conditions are satisfied will be rare as in many cases employers and tax advisers have assumed that smartphones are already covered by the mobile phones exemption. Where employers have been aware of HM Revenue & Customs' (HMRC's) view that smartphones are not 'mobile phones', employers are likely to have provided such devices in circumstances covered by the separate exemption in section 316 ITEPA 2003 for supplies and services used in employment duties. This exemption applies to certain categories of asset where the sole purpose for providing it is to enable the employee to perform the duties of the job, provided that private use is not significant. (For more technical detail on this exemption see the Employment Income Manual at EIM21611.)

HMRC is today announcing a change of view on the interpretation of section 319(4) ITEPA 2003, which deals with the definition of the term 'telephone apparatus', which is used in the definition of 'mobile phone' in section 319(2). Section 319 ITEPA provides an exemption from Income Tax in respect of the provision of one mobile phone per employee without any transfer of ownership.

Read Revenue & Customs Brief 02/12 for the full details.