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Employee ‘smartphone tax’ is axed

Smartphones such as iPhones, BlackBerry and many android-powered devices will no longer be subject to tax as a 'benefit in kind', HMRC has announced.

Unlike ordinary mobile phones, which can be provided tax-free to employees, smartphones were treated as a taxable benefit. This is because HMRC said they were not primarily designed to make or receive voice calls, as the exemption requires.

However, the soaring popularity of android and smartphones, along with technological advances, has prompted HMRC to revise its policy on tax-free mobile phones.

In a statement, the tax authority revealed that such devises now conform to their definition of 'telephone apparatus' and will therefore no longer be subject to tax.

Consequently, employers can now provide these devices to any number of employees without incurring a tax or National Insurance Contributions (NIC) charge.

The change could pave the way for thousands of workers to reclaim tax paid on company smartphones back to the year 2007/08. Anyone seeking a refund for the tax year ending 5 April 2008 must submit a claim by 5 April 2012.

However, devices that only provide Voice Over Internet Protocol (VOIP) - a technology for making free or cheap calls over the internet - will not qualify for the tax exemption.

It means that iPads and other tablet computers will still be subject to the old rules.