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Smartphones: HMRC invites tax refund claims

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A smartphone ‘as configured and understood at the start of 2012’ is a mobile phone and qualifies for the tax exemption for a single mobile phone made available to an employee without transfer of ownership, HMRC has announced.

Since 2007 HMRC has treated smartphones in the same way as personal digital assistants or PDAs, HMRC said in Revenue & Customs Brief 02/12. The department now believes that this view of the exemption in ITEPA 2003 s 319 was incorrect.

It has invited claims to repayment of Class 1A NICs paid by employers who entered the provision of a smartphone on form P11D (or included the benefit in a PAYE settlement agreement) on the basis that neither the mobile phone exemption, nor a separate exemption for employment duties in ITEPA 2003 s 316, applied.

Information provided to HMRC by employers will be used to repay any income tax overpaid by employees in respect of the benefit. However, employees whose employer does not provide the relevant information are invited to contact HMRC directly.

The time limit for claiming repayment four years from the end of the tax year, but HMRC is allowing extra time for 2007/08. ‘If you think you are due a repayment for 2007/08, you will need to contact HMRC and provide the information for that year as soon as possible. HMRC will still consider claims made for 2007/08 if they are made on or before 31 July 2012. For 2008/09 the time limit is 5 April 2013 and for 2009/10 it is 5 April 2014,’ it said.

Chris Lee, a Partner at accountants James Cowper, said: ‘HMRC has finally woken up and found itself in the 21st century. Smartphones are in many cases an indispensable business tool and it is right that they should not be treated as a taxable benefit.’