Employees who use their work Blackberry Personal Digital Assistant (PDA) for personal use could be in for a nasty tax bill.
That’s the view of Tony Moorby, director of taxation services at the Bristol office of PKF Accountants, who is advising all employees with a work Blackberry to keep a diary or record of how they use it to ensure they’re covered if the tax man comes knocking.
The alert comes following the Chancellor’s declaration last year that employees using a Blackberry for significant private use could face a tax bill.
Although the new rules were set out in 2006, many Blackberry users are unaware that they may have to fork out a tax charge of 20% of the Blackberry’s original price if caught using the gadget for "significant" personal activity.
HM Revenue & Customs has not defined how much personal use is acceptable for an employee on a work Blackberry, although where employers provide computer equipment to employees solely for them to carry out the duties of their employment, HMRC accept that it is unlikely that the private use of the computer will be significant.
The rule applies to PCs, laptops and "anything designed to be used by being connected to or inserted into a computer" according to HMRC.
As technology has become more advanced, from April 2006 Revenue classed Blackberrys or PDAs as a computer rather than a mobile phone: currently, personal use of a mobile phone provided by your employer is tax-free.
Previously, businesses could give their staff up to £2,500 worth of equipment as a benefit in kind under the home computing initiative without tax consequences for private use.
However, as from April, employees with £2,500 worth of computer or PDA could attract an annual tax bill of up to £500 if the Revenue has reason to believe there is significant private use.
Mr Moorby said: "The new rules set out by HM Revenue and Customs are going to cause issues with employers who offer their staff Blackberrys or PDAs as a benefit in kind. If the employee is faced with a tax bill, the good intentions of the company are going to backfire.
"The Chancellor’s decision is not one that should be taken lightly, and my advice to employers is to state clearly in writing to their staff that the equipment provided should either not be used for personal use in order to avoid both a tax charge on the employee and an increased national insurance burden on the employer or that any private use is reimbursed by the employee.
"Now the computer tax initiative has been scrapped, it's going to be interesting to see how the Treasury will enforce these new tax rules.
"For example, how are they going to define and quantify significant personal use or insignificant personal use?
"Many employers already collect the cost of private use of mobile telephones via the payroll system after agreeing with the Revenue a flat rate of private use. Hopefully this system can be extended for PDAs. At the very least, the employer is going to have to spend a large amount of time putting in a system to record personal use in order to quantify the tax charges."
