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Employer provided Smart Phones – Changes in tax implications

Posted by: edwinsmith on May 31st, 2012

HMRC have changed their guidance on smart phones which now fall within the meaning of ‘mobile phone’ for tax purposes where an employer provides a mobile phone to an employee.

Smart phones include Blackberry, iPhones and many Android devices.

Previously, smart phones were considered to be PDA’s (Personal digital assistants) as they combined the functions of a mobile phone with many of the functions associated with a computer. This meant that smart phones used to be treated for tax purposes in a similar way to a computer provided to staff. From 2006/07 it meant staff provided with a smart phone should have paid a benefit in kind if the device wasn’t solely for business use (insignificant private use would be allowed).

HMRC now has new guidance on mobile phones including smart phones which can be found in P11d Guide 2011/12 (480) which states in chapter 22.5, “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”.

Please refer to our previous guidance on Mobile phones and PDAs – When are they tax free?.

It should be noted that there are many types of devices with telephone functionality that cannot qualify as a mobile phone. The definition does not cover devices that the primary purpose is other than transmitting or receiving spoken messages, even if it can also be used in this way. Examples of devices that do not fall within the definition of mobile phones include satellite navigation devices, tablets and laptop computers.

Please contact us for any further advice

Filed under: PAYE, Tax

Tax relief for expenses of employment

Posted by: edwinsmith on May 25th, 2012

Reimbursed expenses on P11d forms

Employees (earning over £8,500 including benefits) and directors will be receiving copy p11d forms completed by the employer for benefits and expenses paid in the year to 5 April 2012. Expenses covered by a dispensation do not need to be included on the P11 d form (see below for more information on dispensations).

Where an individual’s P11d form includes reimbursed expenses then a claim should be made for any expenses that were incurred for the purposes of the business. The claim can be made separately to HMRC or as part of completing a self assessment tax return.

Claims for business expenses can only claimed where the expenses is wholly, exclusively and necessarily for business purposes.

The claim must be made in order to prevent tax being charged on the expenses. The claim may be made by letter to HMRC.

The tax charge will come about from a PAYE code being issued that show taxable benefits (including expenses) but no corresponding claim for business expenses. The claim for business expenses should result in a correct PAYE code.

Business expenses paid for by employee

Where expenses are incurred by an employee but not reimbursed by the company then tax relief can be claimed on these expenses either by letter if less than £1,500 or by using form P87  if over £1,000 but less than £2,500. HMRC will ask you to complete a tax return if claiming expenses exceeding £2,500.

Expenses cannot be claimed where the employer has reimbursed the expenses and has an agreed dispensation with HMRC not to report these expenses.


Employers should consider applying for a dispensation to HMRC where routine expense payments such as travelling and subsistence are reimbursed to employees.

This saves the employer time when completing the P11d forms and also saves the employee making any necessary expenses claims.  Please refer to our previous article for further information.    

Please contact us if you require any assistance with your forms or payment.

Filed under: PAYE, Tax

Reminder – P11d forms and types of benefits and expenses payments

Posted by: edwinsmith on May 8th, 2012

Expenses and benefits paid to employees during the year to 5 April 2012 are required to be entered on forms P11D and P11D(b).  These forms are due to HM Revenue & Customs (HMRC) by 6 July.

The resulting Class 1A National Insurance payment is due to HMRC by 19 July if paying by cheque or due into HMRC’s bank account by 20 July if paying electronically (22 July is a Sunday). HMRC do operate Faster Payment so the payment will take approximately 1 working day to clear if your bank operates Faster Payment.  If not, the payment is likely to take 3 working days to clear.

Penalties for late filing of the P11D and P11D(b) forms start at £100 for each month that the forms are late.  Penalties and interest may also be charged if you are late paying the Class 1A National Insurance.

P11ds are the annual declaration of any expenses payments, benefits and facilities provided to:

  • each employee or director earning at a rate  of £8,500 a year or more, and
  • each director earning at a rate of less than £8,500 a year, unless they are :

- a full time working director with no material interest in the company, or

- a director of a charity or a non- profit making concern

 The types of benefits and expense payments to include are as follows. 

  • Company credit card expenses
  • Car benefit - provision of company car to employee
  • Car fuel benefit - provision of fuel for private travel
  • Van and fuel benefit - provision of van for more than just incidental private use
  • Interest free loans including overdrawn director’s loan account - only for loans exceeding £5,000 in 2011/12
  • Private medical insurance
  • Expenses payments reimbursed to director or employee – including Travel and Subsistence (but not mileage allowances using the HMRC agreed rates), Entertaining and Other expenses.

Please refer to the 2011/12 P11d guide http://www.hmrc.gov.uk/guidance/p11dguide.pdf  more details on the above and other types of benefits that need to be disclosed.

If you require any assistance concerning P11d forms or tax implications of benefits that need to be declared then please contact us.

Filed under: PAYE