EIM21701 – Particular benefits: computers: partial exemption: what computer equipment falls within the exemption: years up to and including 2005/06 only

Section 320 ITEPA 2003

The computer exemption is abolished for 2006/07 onwards. For the tax treatment of a computer provided for private use from 6 April 2006 onwards see EIM21699.

Years up to and including 2005/06

The exemption for computer equipment (see EIM21700) applied:

• to any computer (including "laptops") whether used partly for work purposes or wholly privately, and
• to any associated equipment such as a printer, scanner, modem, data storage device or other peripheral equipment "designed to be used by being connected to or inserted into a computer", and
• to software used on the computer,
• whether the computer was provided to the employee or director themselves or to a member of their family or household.

The exemption did not extend to:

• line rental, call charges or other amounts paid in respect of a telephone used to connect the computer to the Internet (but see EIM21617) or other computers in any way or
• computers provided under some arrangements that favour directors over other employees of the employer (see EIM21702).

Whether an item of equipment was a computer was a question of fact. It was usually obvious from the functions that the equipment could perform. A machine that could be used to compute would fall within the definition even if the director or employee used it only for tasks, such as word processing or sending and receiving e-mails, that involved little or no computation in the strict sense of the word. However a game playing machine (even one that worked by the insertion of a disk or cartridge containing the game) was not "computer equipment" if it was not also capable of doing computations for the user. The same applied to an or MP3 player.

Note that peripheral equipment must be "designed to be used by being connected to or inserted into a computer". That meant that digital cameras designed for the mass photography market did not fall within the exemption, because they are designed to be used for taking photographs independently of any computer equipment. A computer may later be used to process the images recorded in the camera, and indeed the camera may function as a camera whilst attached to a computer, but that is not usually the purpose of their design. On the other hand a digital camera designed for attaching to a computer to allow video conferencing would fall within the exemption.

Personal Digital Assistants

Since the computer exemption was introduced in 1999, the number of devices that can conduct some functions normally associated with a computer has grown considerably.

A common example is the Personal Digital Assistant or PDA. Early versions of PDAs were little more than an electronic diary, but as the technology evolved some, such as the BlackBerry, had a primary function as a mobile phone. These early PDAs were exempt from tax under the mobile phone exemption in Section 319 ITEPA 2003 ( EIM21780). That exemption continues to apply to these early PDAs.

But the technology has developed to such an extent that PDAs and BlackBerrys now have additional functions more typically associated with a computer and so can no longer be considered primarily as a mobile phone.

Consequently where before 6 April 2006 an employer provided an employee with a PDA it was exempt as a computer under Section 320. Following the abolition of the computer exemption, from 6 April 2006 the provision by an employer to an employee of a PDA represents a benefit, unless the exemption in Section 316 applies (see EIM21611).