IT Contractor Tax - Accountants for Contractors

HMRC has deemed that smartphones can now have the same tax treatment as other mobile phones, meaning that if the phone contract is in the company's name, and the company pays the monthly bill, all the costs can be reclaimed without any benefit in kind charges.

In a recent tax brief, HMRC acknowledges that it had been incorrect to exclude smartphones from its definition of a 'mobile phone' for the purposes of the tax exemption in Section 319 of ITEPA 2003.

Previously, HMRC did not extend the tax exemption to smartphones, as, in its view, the primary purpose of such devices was not to make calls. HMRC now accepts that most mobile phones are now 'smart', and that technology has moved on rapidly.

If you currently have a mobile phone, as long as the contract is in the company's name, and the company pays the bill, you will no longer have any benefit in kind charges to pay.

The exemption applies only to a single device, provided by the employer, without any transfer of ownership.

In addition, if you have paid any benefit in kind taxes since the 2007/8 tax year, you can reclaim them from HMRC. You will need to be fast, as the deadline for reclaiming tax for the 2007/8 tax year is April 5th 2012 (you have four years to reclaim from the last day of the relevant tax year).

Sadly, the new definition of a smartphone for tax purposes does not extent to tablet computers, such as iPads, despite the fact that you can make calls from such devices using a variety of methods, such as VOIP.