On 22 March 2006 the Chancellor announced in the Budget that the tax exemption, which applied to the first £500 of annual benefit in kind arising on computers made available by employers for private use by their employees (equivalent to £2,500 incl. VAT of equipment) would be removed with effect from 6 April 2006. The tax exemption could be found in section 320 of the Income Tax (Earnings & Pensions) Act 2003.

Since the announcement there has been considerable speculation about the impact this change would have on computers provided for business purposes where some private use is also made. In particular there has been commentary implying that the change introduces a new administrative burden on employers. It suggests that employers will need to maintain additional records in order to establish whether significant private use has been made of a computer provided for business purposes to determine whether a tax charge arises in respect of the private use.

This is not the case.

Section 316 of the Income Tax (Earnings & Pensions) Act 2003 provides that no income tax will arise on accommodation, supplies and services used in employment duties. This includes computer equipment provided for business purposes where any private use made is not significant. Consequently where employers provide computer equipment to employees solely for them to carry out the duties of the employment at home, HM Revenue and Customs accept it is unlikely that private use of the computer will be significant, when compared with the primary business purpose of providing the computer equipment.

Following Royal assent of the Finance Bill, usually in July, HM Revenue and Customs will provide updated guidance in this area to ensure that clear practical advice is available for employers and tax practitioners on how the term ‘not significant’ should be interpreted.