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 leant that 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 today. 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.”
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