EIM21781 - Particular benefits: hands-free mobile telephone kit
Section 319 ITEPA 2003
EIM21780 explains the tax consequences when an employer provides
an employee with a mobile telephone.
In Section 319(2) ITEPA 2003 a mobile telephone is defined as
“telephone apparatus” which –
- is not physically connected to a land-line; and
- is not used only as a wireless extension to a telephone physically connected to a landline or anything that can be used to gain access to, or use, a public telecommunications system.
“Telephone apparatus” is defined as “wireless
telegraphy apparatus designed or adapted for the primary purpose of
transmitting and receiving spoken messages and used in connection
with a public communications system”.
We accept that a hands-free kit comes within the definition
of “telephone apparatus” because it is adapted for this
purpose.
An employer may provide a “hands-free kit” to
enable an employee to use a mobile telephone in a car. The tax
consequences depend on whether the car is owned by the employer or
the employee and the manner in which the kit is provided.
Hands-free kit fitted in an employee’s own car
On general principles, the provision by an employer of a
hands-free kit fitted in an employee’s car is chargeable
under the benefits code (
EIM20006). However, as long as the
employer retains ownership of the kit installed in the
employee’s vehicle, there is no benefit charge because of the
exemption in section 319.
If, on the other hand, the employer buys the kit and
transfers ownership to the employee, s319 has no effect and there
will be a benefit charge if the transfer is made at other than
market value (
EIM21640).
If the employee buys the kit and retains ownership but the
employer reimburses the cost to the employee, the reimbursement
represents earnings chargeable under Section 72 ITEPA 2003 (
EIM20601).
Hands-free kit fitted in a company car
Where an employee is provided by his employer with a car, the
hands-free kit is an accessory and would normally be included in
the price of the car for tax purposes. However, Section 125(2(d)
ITEPA 2003 specifically excludes a mobiles phone within Section
319(2) from being an accessory. So there are no benefit
implications at all where a hands-free kit is fitted in a company
car.
There are also no benefit implications if an employee buys
the kit and fits it with the employer’s permission.
However, if the employee buys the kit and retains ownership
and the employer reimburses the cost to the employee, the
reimbursement is again treated as earnings within Section 72.
Fitting costs
Fitting costs are included in the cost of the asset, which is the whole mobile telephone fitted into the car, not the hands-free kit in isolation.
