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BN 30 - Exemptions For Computers & Mobile Phones

Who is likely to be affected?

1. Employees who are loaned a computer and/or mobile phone for private use by their employer. Employers (and third party facilitators) who loan computers and/or mobile phones to their employees for private use.

General description of the measure

2. This measure will change the tax exemption that applies to the benefit in kind that arises when employers loan mobile phones to their employees and members of the employee’s family or household for private use. It will also remove the tax exemption that applies to computers loaned to employees for private use.

Operative date

3. Will have effect from 6 April 2006.

Current law and proposed revisions

4. Computers and mobile phones loaned to employees by their employer may be exempt from the tax charge on the benefit in kind arising. For computers (section 320 Income Tax (Earnings and Pensions) Act 2003 (ITEPA)) the exemption currently applies to the first £500 of annual benefit in kind. There is currently no limit to the number of mobile phones that can be loaned and no financial limit (section 319 ITEPA).

5. This measure will remove the exemption for computers made available by employers to their employees for private use. It will also restrict the number of mobile phones employers can loan to employees for private use tax-free to one per employee, and will not extend to members of the employees’ family or household.

6. The measure will also amend section 319 ITEPA to ensure that where an employee has been provided with a mobile phone for private use through a salary sacrifice arrangement no charge will arise under the general earnings charge of section 62 (3) ITEPA, even if the employee has the right to surrender the phone for additional wages or salary.

7. Some employers have chosen to use vouchers as the mechanism for making available mobile phones to their employees for private use. In these circumstances a charge to tax and Class 1 National Insurance contributions (NICs) arises on the provision of the voucher. This measure will exempt the provision of a voucher from tax and NICs where it is used to facilitate the loan of a mobile phone to an employee for private use, but only where the benefit in kind arising on the loan of the mobile phone would have been exempt if a voucher had not been used. This will mean that from 6 April 2006 the method used by employers to loan mobile phones to employees will have no effect on the outcome for tax and NICs purposes.

Further advice

8. If you have any questions about this change, please contact your local HMRC office (see telephone directory for details) or call the Employer Helpline on 0845 7143 143.