SE21608 - Particular benefits: supplies and services provided other than on the employer's premises: employer subscribes for telephone line or broadband internet access in the employee's home

Section 155ZA ICTA 1988

Telephone lines

Some benefits which are work related supplies and services, provided other than on the employer's premises, are exempt from tax ( SE21602). This exemption will apply to a telephone line in the employee's home, for which the employer is the subscriber, if

• there is a clear business need for the employer to provide the employee with a telephone, for instance if making and receiving telephone calls from the home are a vital and central part of the employee's duties and
• the employer has procedures to monitor, control and minimise the cost to him of private use and
• the employer has no intention of rewarding the employee.

The employer may control and minimise the cost to him of private use by either

• recovering from the employee the cost of private calls or
• ensuring that the cost of any private calls is kept to a minimum, for instance only allowing the employee to make local or off peak calls in clearly defined circumstances.

If the first bullet applies only the benefit of the telephone line will be exempt under Section 155ZA. The benefit of the calls, both business and private will not be exempt and must be returned on Form P11D. The amount the employee makes good ( SE21120) in respect of the private calls will reduce the cash equivalent of the benefit and the employee may claim a deduction for calls made in the performance of his duties (SE32490). Alternatively if the business calls are covered by a dispensation ( SE30051), and the full cost of private calls is made good by the employee, there is no need to report a benefit or claim a deduction on the P11D.

If the second bullet applies both the line and the calls may be exempt if the cost of private calls is not significant compared to the total costs of the line and calls.

See SE21609 for examples of employments where the benefit of a telephone line is likely to be exempt under Section 155ZA.

Broadband Internet access

The first £500 of the benefit charge arising on provision by an employer of computer equipment in an employee's home is exempt from tax under Section 156A ICTA 1988 (see SE21697). This exemption does not include Internet connection fees paid by the employer.

But with effect from 6 April 2000 Section 155ZA (see SE21602) exempts from tax assets or services provided by an employer in the employee's home solely for work purposes, as long as any private use is not significant (see SE21605).

Where an employer pays for Internet connection to the employee's home solely for work purposes, under a package where there is no separate billing or record of access calls, and no breakdown is possible between work and private calls, we accept that where private use is not significant (and private use does not affect the cost of the package) the costs of connection are exempt from tax under Section 155ZA.