|
When an employer installs computer equipment in an employee's home, the provision of such assets of the employer for the use of the employer is a taxable benefit unless the statutory workplace exemption, as set out in section 316 of the Income Tax (Earnings and Pensions) Act 2003 applies.
The workplace exemption only applies if the computer equipment is not provided, in part, for the employee's private use and there is no element of reward in the provision. However, the exemption acknowledges that there will inevitably be some private use made of it and the exemption is not lost as long as any private use by the employee, or by members of the employee's family or household, is "not significant".
As a result, if the terms on which the computer equipment is provided state that the employee is permitted to use the equipment privately, there will be a tax charge. If the terms state that private use is not permitted and that any private use that is made of it is subject to the employer's internal arrangements to monitor, control and minimise the cost of any private use, a tax charge does not arise.
Along with the computer equipment, the employer may pay for the installation of a telephone line in order to provide Internet connectivity. How does the workplace apply to these support facilities?
HMRC singles out telephone lines for specific guidance in the Employment Income Manual, at www.hmrc.gov.uk/manuals/eimanual/EIM21600.htm and the following pages.
Where an employer provides a telephone line in an employee's home for which the employer is the subscriber, the exemption applies if
- there is an identifiable business need for the employee to be provided with a telephone, and
- the employer has internal controls to monitor, control and minimise the cost to the employer of any private use, and
- there is no intention on the part of the employer to reward the employee.
HMRC's view is that, if the employer controls and minimises the cost of private by, for example, allowing employees to make local off-peak calls in clearly defined circumstances, both the telephone line and the calls fall within the workplace exemption. However, trying to minimise the costs by recovering the cost of private calls or using a fixed tariff does not achieve the objective as it does not meet the requirement that private use is "not significant".
HMRC provides examples of employments where the provision of a telephone line is likely to meet the conditions for exemption, namely:
- ministers of religion, where there is a need for contact with their parishioners and congregations 24 hours a day
- teleworkers, where a telephone line at home is provided for remote computer working or telephone business
- employees such as 'live-in' care workers in residential homes for the elderly or disabled or hospices, whose daily duties may require contact with the emergency services or the relatives of those they care for.
HMRC also accepts that, where the employer pays for broadband Internet access, the workplace exemption applies if
- it is not possible to itemise the use of the Internet to identify business and private use separately (as is usually the case),
- private use does not affect the cost of the package, and
- private use is insignificant.
However, if the contract for the Internet service is the employee's and the employer reimburses the employee, the exemption cannot apply as no benefit is being provided. Rather, the payments must be reported as expenses and the employee may be entitled to a deduction if the business use can be specifically identified - although that is usually not possible in the case of broadband access.
...back to 1 June 2006
|
For Payroll and Human Resource Professionals
