PART 2: TAX
for the business use of their own mobile phone are taxable. It follows then that a mobile phone provided for business use is not taxable either.
If the employer provides more than one mobile phone to an employee solely for business use, and private use is not significant, the second phone is not taxable. If only one mobile phone is provided for both business and private use it will be exempt. If two mobile phones are provided for mixed business and private use, one will be exempt and the other will represent a benefit. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS It is up to the employee and employer to decide which one will be exempt and which one will be chargeable. *The definition of mobile phone was tightened from April 2006 to exclude Smartphones and other Personal Digital Assistants (PDAs) but relaxed from 6th April 2012 to reclassify Smartphones as mobile phones and any class 1A paid by the employer or Income Tax by the employee between 2006-2011 was refunded, but only to those employers who applied for the refund. Prior to 6th April 2006 the exemptions were allowed in respect of personal use by the employee or family members, and there was no limit on the number of mobile phones per employee. From 6th April 2017 the exemption for one mobile phone is lost if the phone is provided under a salary sacrifice arrangement. In addition, if salary sacrifice applies then the reportable benefit in kind is the higher of the cost to the employer and the cash foregone. TERMINATION SETTLEMENTS Lump sum payments made on termination or loss of office/change of duties, provided they are not normal earnings and are not separately taxable under any other tax provisions, are free of tax subject to a maximum limit of £30,000. All qualifying payments and benefits in kind (e.g. car) should be aggregated for the purpose of assessing any liability. Implications following the Finance Act 1998: • the use of the term ‘termination settlement’ rather than ‘termination payment’ indicates that both cash and non-cash benefits are to be treated equally. The cash equivalent of non-cash benefits e.g. car, loan or use of assets, must be taken into account • employers only need to report termination settlements inclusive of all non-cash benefits where the sum total exceeds the taxable threshold • assessment for tax is made in the year that payment is made (previously assessment was made in the year of termination) and at rates applicable to the year of payment. This may require the carry forward of any ‘unused’ part of the exemption limit from one tax year into a subsequent tax year, as it is directly related to the termination and is not an annual allowance, cash is taxed first followed by benefits in any year • where a termination settlement is known at the initial stage, provided there is no significant subsequent variation (deemed to be an increase exceeding £10,000), the employer must report any settlement which exceeds the threshold by 6th July at the latest following the year of termination. No printing, copying or reproduction permitted. It is possible that payments as part of a termination agreement may be made from more than one source (e.g. redundancy lump sum from an employer and enhanced retirement lump sum benefit from an occupational pension scheme). In such cases all payments and benefits are to be aggregated when assessing the tax liability.
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