E-mail Brings Benefit in Kind?

One possible side-effect of Gordon Brown’s decision in last March’s budget to remove the tax exemption on computers supplied to employees is that employees who use office computers for sending personal e-mails could face a benefit-in-kind (BIK) charge on their use of the computer unless this was ‘not significant’. The HMRC Budget Note (BN 30) says that the charge will apply to ‘employees who are loaned a computer… for private use by their employer.’ However, it now seems that HMRC may interpret such a ‘loan’ to include work-based computers.

The issue is causing considerable consternation, as it is widely known that most employees do send and receive personal e-mails at work and furthermore, the regime which would need to be put into place to police such usage might cause considerable irritation to employees and employers. It has also been suggested that such surveillance would have to be carried out meticulously in order to not infringe the employees’ rights to privacy under the Human Rights Act.

The BIK charge will be calculated by charging tax on 20 per cent of the value of the item provided annually. For example, a £1000 computer would generate a BIK of £200 annually, giving tax payable for a higher-rate (40 per cent) taxpayer of £80. National insurance is also paid on taxable BIKs. It is said that the HMRC helpline has confirmed that the measure will only apply to computers first loaned to employees after 6 April 2006, but it would be unwise to rely on this.

The Treasury was reported to be backtracking on the position and it has been suggested that there will be no BIK if the computer is required for work. How this fits with the guidance given by HM Revenue and Customs remains to be seen and it is to be hoped that these issues are resolved soon.