HMRC have issued the above brief clarifying the treatment of smart phones provided to employees.

The Brief is relevant to 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 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).

The Brief announces a change of view by HMRC on the interpretation of section 319(4) ITEPA 2003, which deals with the definition of the term ‘telephone apparatus’, 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.

Previously HMRC had treated smartphones in the same way as personal digital assistants. HMRC now considers that its application of the legislation to smartphones is incorrect and that smartphones do satisfy the conditions to qualify as ‘mobile phones’. However, this applies to smartphones as configured and understood at the start of 2012.

HMRC further advise that if an employer provided a smartphone for 2010-11 and years back to 2007-08 and the three bulleted conditions listed above are satisfied, it may be possible to seek repayment of the Class 1A National Insurance contributions (NICs) liability in relation to the benefit of the smartphone.

More information is available at http://www.hmrc.gov.uk/briefs/income-tax/brief0212.htm