Section 319 of the Income Tax (Earnings and Pensions) Act 2003 specifically removes any liability for income tax on the provision of a single mobile phone that is placed at the disposal of an employee. An additional phone for the employee's use, or a phone provided for the use of a member of an employee's family or household, is fully taxable under the relevant rules, e.g. the rules for assets as an asset placed at the employee's disposal, or the voucher rules.
However, earlier rules, which allowed an employee to have more than one mobile phone and family/household members also to be loaned mobile phones, continue to apply to mobile phones that were provided before 6 April 2006.
An employee is not treated as having more than one mobile phone if the employer provides two SIM cards for the same telephone number so that, for example, the employee can have a phone installed in a car and a separate mobile phone.
The current exemption applies to the telephone itself, to the rental and call charges met by the employer under a contract between the employer and the service provider and, if the phone is installed in a car, van or heavy goods vehicle, to any associated hands-free kit and installation costs.
There is no condition imposed relating to the extent of the use of the mobile phone for private use. The exemption applies if it is provided exclusively for private use or if it can be given up for a higher wage or salary. There is also no reportable benefit under the voucher rules if the phone or call charges for the single phone are provided by means of non-cash vouchers or by using the employer's credit card.
However, there are a number of other situations where the exemption does not apply.
- If the employer buys the mobile phone and gives or sells it to the employee so that ownership is transferred to the employee, the benefit is valued according to the market value of the phone at the time ownership is transferred and the amount is reported in Section A of form P11D. There is no P9D reporting requirement for lower-paid employees, i.e. those with an earnings rate of less than £ 8,500.
- If the mobile phone belongs to the employee and the employer reimburses the employee's costs in acquiring the phone, the payment must be made through the payroll and both tax and NICs deducted.
- If the mobile phone belongs to the employee and the employer pays the employee's personal bills direct to the service provider, the amount paid is reported in Section B of form P11D or Section A(2) of form P9D. A liability for Class 1 NICs arises at the time the payment is made.
- If the mobile phone belongs to the employee and the employer reimburses the employee's business call charges only, the payment is reported in Section N of form P11D. There is no P9D reporting requirement for lower-paid employees. There is no liability for Class 1 NICs. (A dispensation would avoid the reporting requirement here.)
- If the mobile phone belongs to the employee and the employer reimburses the employee's private call charges, the payment is reported in Section N of form P11D or Section A of form P9D. A liability for Class 1 NICs arises at the time the payment is made.
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