Cash Q&A: Why is there an entry for a mobile phone on my new tax code?

I HAVE just received my new tax code and notice that there is an entry for a mobile phone. My employer provides me with a Blackberry 9860 and I was under the impression that mobile phones were not classed as benefits in kind.

What’s the situation?

AW Glenrothes

A: You are correct in stating that normal mobile phones are not regarded as benefits in kind and therefore no taxable benefit should be included in your tax code. This has been the case for a number of years, but is limited to one mobile phone per employee.

When smartphones such as Blackberries started to be provided by employers in 2007, however, they were regarded by HM Revenue & Customs as Personal Digital Assistants (PDAs) which were not exempt benefits.

HMRC took this view on the understanding that smartphones were not designed or adapted for the primary purpose of transmitting and receiving spoken messages and used in connection with a public electronic communications service, ie that they were digital services first and mobile phones second.

Other examples of devices caught by this “primary purpose” test are navigational equipment and any device which uses VOIP to permit calls. This change of view will not have any effect where the employer provides an employee with a normal mobile phone and a smart phone, because the mobile phone exemption is limited to one phone per employee.

HMRC has just issued a revised interpretation and now accepts that smartphones are primarily mobile phones, and will apply this retrospectively back to 2007-8.

HMRC has sought to have the claims for tax relief submitted by employers but if your employer does not contact HMRC you can do so yourself. If you were taxed on a smartphone as a benefit in kind in 2007-8 you only have until 31 July, 2012 to make a claim for that year.

Q: For peace of mind, in 1995 my parents transferred the title deeds on their house into my name, retaining a life rent in the property. My father died some years ago and my mother lived in the house until her death last year. On her death I inherited the house, which has now been sold. My mother’s estate was below the inheritance tax (IHT) threshold but could you tell me if am I liable for capital gains tax (CGT) on the increase in value of her house from 1995 to the date of sale?

SB Edinburgh

A: In simple terms the answer is yes, you are liable to CGT on the uplift in value from 1995 to the date you sold the property.

Had the property remained in the ownership of your parents until their deaths it would have passed to you with a base cost equal to the market value at the date of your mother’s death and you would only be liable to tax on the movement in prices since her death.

By transferring ownership to you in 1995, you acquired the property at the market value at that date, (which may not have been full market value depending on the terms of the liferent to your parents and the security of tenure they were given).

You will need to notify HMRC that you need to submit a tax return (search www.hmrc.gov.uk for form SA1). If missives were concluded for the sale before 5 April, 2012, you need to do this before 6 October, 2012 and the tax will be due for settlement by 31 January, 2013.

• Glen Gilson is a Partner and Head of Private Clientand Financial Services at HBJ Gateley.

If you have a question you need answered, please email Jeff Salway at [email protected]. The above is for general purposes only and is not tailored for individual use. It does not constitute legal, financial or investment advice on any particular matter and must not be treated as a substitute for specific advice. No action should be taken in reliance of the information given. The Scotsman Publications Ltd and HBJ Gateley accept no liability on the basis of this article.