Company mobile phones (480: Chapter 22)
How to tax company mobile phones given to employees.
Overview
22.1
Section 319
Unless they can be converted into money by the employee, there’s no charge to tax on:
- one mobile phone given to an employee
- any line rental or the cost of any private calls for that phone paid for by the employer
22.2
One mobile phone may consist of 2 connections (for example, 2 SIM cards) to the same number, one in a handset and another in a hands-free phone in a car. However, 2 connections to 2 different numbers represents 2 mobile phones.
22.3
A mobile phone given to a member of an employee’s family or household is taxable in all circumstances, unless the family or household member is given the phone as an employee in their own right. Money an employer pays to an employee to use their own mobile phone is taxable.
22.4
Section 316
If an employer gives a mobile phone to an employee solely for business use, and private use is not significant, there’s no charge to tax. Consequently, it’s possible for an employer to give 2, or more, mobile phones to an employee, without creating a tax charge, if one (or more) is given solely for business use (and private use is not significant) and only one is given for private use. But if 2 mobile phones are given for private use, or for mixed private and business use, only one is exempt.
It’s up to the employee and the employer to decide which one is exempt and which one is chargeable as a benefit.
22.5
Section 319
Where apparatus is clearly designed or adapted for the primary purpose of transmitting and receiving spoken messages and is used in connection with a public communications service, the fact that it can also be used for other functions will not prevent it from falling within the meaning of mobile phone.
This means that smartphones will fall within the meaning of mobile phone. Certain devices that were primarily designed and adapted as Personal Digital Assistants (PDAs) in the past have evolved over time so that many modern consumer PDAs are likely to be smartphones. This is an area of rapidly changing technology and it is not possible to be certain about the application of the definition of mobile phone to future or new forms of smartphone.
There are many types of devices that have phone functionality which do not qualify as mobile phones. The definition does not cover apparatus that’s designed or adapted for a primary purpose other than transmitting or receiving spoken messages, even if that apparatus is also capable of being used in this way.
Examples of apparatus that does not fall within the definition of a mobile phone include satellite navigation devices, devices that are solely PDAs and tablet and laptop computers.
In general, devices that use Voice Over Internet Protocol (VOIP) systems to make and receive phone calls will not satisfy the primary purpose test.
Optional remuneration arrangements
22.6
Section 228A
From 6 April 2017 where the benefit is given as part of optional remuneration arrangements the Income Tax exemption does not apply. There’s further guidance about optional remuneration arrangements in Appendix 12.