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oh dear: Firms face new tax on staff e-mail to friends

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    oh dear: Firms face new tax on staff e-mail to friends

    Firms face new tax on staff e-mail to friends
    By Gabriel Rozenberg, Economics Reporter

    EMPLOYERS could be forced to police their staff’s use of office computers or risk facing a punitive new stealth tax on themselves and their employees, The Times has learnt.

    Tax lawyers and Opposition MPs are seeking urgent clarification of the scope of new taxes on business computer equipment, which Gordon Brown introduced without fanfare in his Budget in March.

    The Treasury has played down the extent of the changes. However, the Finance Bill, to be debated in the House of Commons tomorrow, makes clear that both employers and employees will now be taxed if they use office computers for personal reasons, such as surfing the web or sending e-mails to friends, unless their personal use is “not significant”.

    The new taxes are the result of Mr Brown’s controversial decision to scrap the Home Computing Initiative, a tax break that let hundreds of thousands of people buy computer equipment at cheap rates through their employers.

    Under the rules that replace the scheme, office computers used in part for non-business purposes are treated as a benefit in kind, meaning that employees will have to pay income tax on them, and employers will have to pay national insurance contributions for them as well.

    On a computer bought for £2,000, an employee paying higher-rate tax would face a £160 bill each year and an employer would have to pay an extra £51.20.

    Anne Redston, chairman of personal taxes for the Chartered Institute of Taxation, writing in Taxation magazine, said the result could be “a new bureaucratic burden” on employers to make sure that private use of computers was kept to an insignificant level.

    It was not clear what constituted an “insignificant” use, she said. On the basis of guidance from HM Revenue & Customs (HMRC), it seemed that employers would now be required to have a clear, stated policy against widespread private use of computers, which they would have to enforce with “reasonable checks”.

    An alternative reading of “significant”, used in the context of rules on company vans, was even stricter, she said, and would mean virtually every computer used would face the new charges.

    David Reynolds, of the Independent Association of Accountants Information Technology Consultants, said the Treasury could collect an extra £2.2 billion over the next three years if it applied such a strict interpretation of the law.

    A Treasury spokesman said: “HMRC will take a practical view of what significant private use is.”

    Treasury sources suggested that the rules would not apply to computers required for office work, even if employees used them extensively for non-work purposes.

    Ms Redston said that such an interpretation of the law, which exists nowhere in the legislation, would be unusual but very welcome.

    The Conservatives will seek to clarify the scope of the law in debate on the Bill tomorrow. Mark Francois, the Shadow Treasury Minister, said: “Practically, it will be extremely difficult for employers to stay on the right side of tax law unless they are given clarity. The cynical interpretation is that this is a massive tax grab.”

    #2
    More details here HMRC

    eg


    Example 4 (exemption does not fully cover cash equivalent, computer necessary to perform duties, part private use)

    A magazine publishing company employs graphic designers who do much of their work at home. They are provided with computers, scanners, colour laser printers and software with a market value of £6,000. All the employees occasionally use the equipment for private purposes and one is able to demonstrate that it is used for work 80% of the time and privately 20% of the time. At no time is the equipment used concurrently for work and private purposes. That employee pays tax on employment income as follows:

    Annual value of the computer 20% of £6,000 = £1,200
    Less exemption £500
    Cash equivalent of benefit £700

    From the cash equivalent the employee can claim a deduction in respect of the use of the benefit for performing his duties (see EIM21637 and EIM31661). The amount of that deduction is 80% of £700 = £560. The employee would therefore pay tax on a net benefit of £140.
    Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.

    C.S. Lewis

    Comment


      #3
      Like they'll actually be able to police that.

      Can you imagine the volume of data for a small corporate they'd have to store and audit - it's completely unenforceable.

      The tax is simply easier and cheaper to pay rather than to argue over. Another way of screwing people.

      How would it work in my situation? I personally own all of my company's equipment and do not charge the company to use it (so if the Ltd goes under, I can still work). Do I have to pay this tax for using my own equipment privately?
      Serving religion with the contempt it deserves...

      Comment


        #4
        Oops

        Looks like CUK wont be free in future

        Comment


          #5
          This is all totally absurd. Usage of computer equipment does not shorten its life since it is is usually obsolete and disposed of long before it fails, so why not make use of it rather than leave it idle and go out and buy another for private use? This is all part of Brownstuff's drive to simplify the tax system and reduce the administrative burden no doubt no doubt. The bloke is an absolute (fill in your own words here) and needs killing in the most painful long drawn out way possible.

          PS TM. You can still claim capital allowances on privately owned equipment used for business. Unless that's gone too.
          bloggoth

          If everything isn't black and white, I say, 'Why the hell not?'
          John Wayne (My guru, not to be confused with my beloved prophet Jeremy Clarkson)

          Comment


            #6
            http://www.hmrc.gov.uk/manuals/eimanual/EIM36730.htm
            bloggoth

            If everything isn't black and white, I say, 'Why the hell not?'
            John Wayne (My guru, not to be confused with my beloved prophet Jeremy Clarkson)

            Comment


              #7
              Is this a Brownstuff pattern? Encourage firms to buy equipment for employees, then change the rules and tax them on it. Just like the 0% corporation tax that drew a lot of self employed/partenrships to incorporate, then put it back up. Fat ugly incompetent devious F*.
              bloggoth

              If everything isn't black and white, I say, 'Why the hell not?'
              John Wayne (My guru, not to be confused with my beloved prophet Jeremy Clarkson)

              Comment


                #8
                Never ascribe to malice that which is adequately explained by incompetence.
                Insanity: repeating the same actions, but expecting different results.
                threadeds website, and here's my blog.

                Comment


                  #9
                  Both I would say. They are maliciously incompetent.
                  bloggoth

                  If everything isn't black and white, I say, 'Why the hell not?'
                  John Wayne (My guru, not to be confused with my beloved prophet Jeremy Clarkson)

                  Comment


                    #10
                    I'd rather they were incompetently malicious. Pity they can't even get that right.

                    Comment

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