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HMRC ruling on paying tax on mobile phones and smartphones

One of the many joys of being a partner or a locum, is that you are in most cases deemed self employed by HMRC and you don't need to worry about the complicated rules of National Insurance and benefits in kind for ourselves.

The worries are restricted to the employed (including salaried GPs and registrars). This mainly covers travel, provision of cars, car fuel, beneficial loans, entertaining, living accommodation, and a number of more curious catagories. For those wanting to know more.

We know that HMRC is digging deeper and deeper into looking in the records of businesses to spot unwitting benefits in kind.

We accountants are keen to avoid these issues for our clients, as the client can end up paying income tax and National Insurance on a benefit they did not realise they had. I was reminded how detailed these rules are with an HMRC ruling last week.

Back in 2006, HMRC decided that the employee would not have to pay tax on the benefit of being given a mobile phone by the employer if the mobile phone allowed the employee to perform their job. The waters were muddied by the spread of so-called smart phones, iPhones, BlackBerrys and the like. HMRC decided that these were not primarily telephones and the exemption from being taxed as a benefit in kind would not apply.

The latest news is that it has backed down and that the provision of a smartphone will not cause the benefit in kind to apply.

So as I say, with this level of detail thank goodness GP partners and locums are treated as self employed and don’t need to worry about this. However, I am seeing more and more young locum GPs coming to see me having set themselves up as limited companies.

If you are a director of a limited company then you are an employee, and if you are an employee then the benefit in kind rules apply. I always ask the locum why they decided to operate through a company and I hear a range of answers from  - companies only pay 20% tax (true but you pay the difference up to your personal tax level when you take the money out of the company)  - my colleagues advised me to do it (no comment)  - now I have limited liability – (isn’t that why you pay your medical defence union?)

So, if you are a GP partner reading this you can now provide your staff with mobile phones with the security of knowing you won’t have to worry about taxing the benefit in kind. If you are a locum reading this and operating through a limited company it might be worth getting a second opinion on whether you are operating in the most efficient way!

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