Tax refund for your work mobile phone?
And why do we care about how the taxman views mobile phones? Because it could net us a tax refund.
TaxableThe issue was that HMRC has a different view of mobile phones as it does of devices which are not designed for making or receiving calls. Mobile phones can be given to employees without any need for tax. The gadgets are taxed as a benefit-in kind, which means you have to pay income tax and national insurance on the value of the phone.
Changed viewIn the past, it had decided that these devices were far too clever for their own good, and therefore did not qualify as phones. This week, however, it published a briefing paper admitting that this had been incorrect, and that it was changing its stance on the phones. The phrase that pays is: "HMRC now accepts that smartphones satisfy the conditions to qualify as 'mobile phones'." Which is very generous of them.
James Warwick, a partner in Deloitte's employment taxes group says; "HMRC's advice is that a smartphone is a mobile phone, despite its extra capability. This 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 this change applies only to devices primarily designed for voice communication and specifically says a mobile device that only provides Voice Over Internet protocol (VOIP) will not qualify. Therefore tablets and other similar devices remain subject to the existing regime.
Refund?The change is effective immediately, and can be retrospectively applied for the past four years, which means you could be due a refund.
It's worth highlighting that not all employers will have provided this as a taxable benefit. A good chunk of them will have been provided solely for business purposes, which means they wouldn't have been taxable in the first place.
It's only if there was no business reason for giving you the phone (and it's the only phone your employer provided to you) that you may well have paid tax and NI on it. In these cases, HMRC has confirmed that a claim can be made for a refund of any tax and NIC paid.
If you consider that you are due a repayment you should contact your employer to ask them to supply HMRC with the information they need in order to be able to repay the tax and NI. There's no deadline for applying for the money back, but you can only claim for four years before the date of your application, so it's worth doing as soon as possible.