HMRC rethink on tax rules for smartphones

Employees could be disadvantaged after HM Revenue and Customs (HMRC) changed its definition of mobile phones for tax purposes to include smartphones and personal digital assistants.

Previously, HMRC had said a mobile could be offered as a tax-efficient benefit to staff, but to be classified as such, its primary purpose had to be for transmitting and receiving spoken messages.

HMRC had previously decided PDAs and smartphones did not fulfil this condition and defined these as computers. In February, it changed its definition.

Inez Anderson, tax director at Smith and Williamson, said: “This could create disadvantages where there has been a mobile phone and a smartphone provided because, in the past, an employee could have had a mobile phone, which would have been exempt under legislation, and a smartphone, which was also exempt because it was provided for the main purpose of carrying out employment duties.

Now they will both be regarded as a phone, and each individual can only have one phone exempt from tax.”

Read more about mobile phones in benefits packages