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Smart phone benefits

What is it that has only been around for about ten years, but which most people (it seems) would now be lost without?  Answer – A smartphone.

So the provision of a fully paid-for reasonable quality smartphone, free of tax and National Insurance (NI), would be a benefit most employees would really appreciate, right?  Even where it’s not really required for business, it could be offered, generally or as part of a reward scheme for high achievers, as a means of incentivising and retaining employees.

Good news!  The supply of one mobile phone to each or any employee or director, for private or business use, is exempt from both tax and NI.  The exemption covers the phone itself, any line rental and the cost of calls (business or private) paid for by the employer on that phone.

It is vital to note that the contract must be between the employer and the phone company  –  you can’t just reimburse the employee for the cost of their own contract.

Without this specific exemption in tax legislation, employees would only be able to claim tax relief on the cost of business calls, and then only where such calls are separately itemised on bills.  This makes the exemption of mobiles all the more valuable, given the way many contracts are structured.  Often, they work on a fixed monthly price, giving internet access along with call and text facilities, so it would otherwise be impossible even to claim tax relief for the cost of business calls as they are not itemised.

85 percent of respondents in a recent survey were not aware that major UK mobile phone operators have separate, cheaper calling plans targeted at small businesses.  At the time of drafting these notes, this includes, for example, EE (the holding company for T-Mobile and Orange), Vodafone, and O2, all of whom allow free unlimited calls between sharing phone lines.

Business contract phone customers also enjoy a variety of benefits which may include: access to the best range of available phone sets within the network; dedicated and more efficient business customers support centres; inclusive phone insurance; flexible contract terms with opportunity to upgrade mid contract.

The definition of a mobile phone includes “apparatus designed or adapted for the primary purpose of transmitting and receiving spoken messages and used in connection with a public electronic communications service”.  Where it fits the definition, the fact that it can also be used for other functions (internet access, email, etc) will not prevent it from falling within the meaning of “mobile phone.”  Fortunately, HM Revenue & Customs (HMRC) have confirmed that smartphones are covered by the exemption.

However, a word of warning:  Care must be taken in an area of rapidly changing technology.  HMRC have also noted that certain devices that were primarily designed and adapted as “Personal Digital Assistants” (PDAs) – e.g. tablets and laptops – have evolved over time so that many modern PDAs are also usable as phones.  HMRC have made it clear they do not regard such equipment as falling within the exemption.  Given the rate of evolution of equipment it is not possible to be certain about the definition of “mobile phone” for future or new forms of smartphone.  If in doubt, take advice.

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