NUMBERS UP ON HMRC 'SMARTPHONE' TAX (22/02/12)

Employees who are given smartphones by their employers will no longer have to pay tax or national insurance contributions (NICs) for them, HM Revenue and Customs (HMRC) has said in new guidance.

Previously, smartphones were excluded from the tax exemption as they were not primarily designed to make or receive voice calls, as this exemption requires.

However, HMRC has now revised its guidance on smartphones, which means these devices can be provided to any number of employees without any tax or National Insurance Contributions (NIC) being payable. It also means certain employees can make a claim for a refund of any tax and NIC paid to date.

The change is good news for employees as it means there's no tax or NIC to pay on their first work mobile phone, regardless of how much the employee uses it privately.

Previously HMRC took the view that smartphone devices were excluded from this exemption, which placed restrictions around what could be provided to employees without a benefit in kind arising.

That view has now changed so that the provision of one qualifying mobile device (e.g. smartphone) will be exempt from income tax and may allow provision of smartphones as a tax efficient benefit.

However, HMRC has said the tax exemption applies only to devices primarily designed for voice communication and specifically says a mobile device that only provides Voice Over Internet protocol (VOIP) - a technology for making free or cheap calls over the Internet - will not qualify.

This means that tablets and other similar devices will remain subject to the old tax rules.