EXPLANATORY NOTE

1. This Clause exempts, from 6 April 1999, the benefit where an employer provides an employee with a mobile telephone which is used for private calls, including where it is provided with a car, van or heavy commercial vehicle.

2. This exemption will remove a significant and burdensome tax compliance requirement for employers and employees.

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3. Subsection (1) introduces a new Section 155AA of the Taxes Act 1988 which contains the exemption.

4. New Section 155AA (1) exempts a mobile telephone provided by an employer to an employee (or to a member of the employee’s family or household) from the general employee benefits tax charge in Section 154 of the Taxes Act.

5. New Section 155AA (2) defines a mobile telephone, which excludes a cordless or telepoint telephone.

6. New Section 155AA (3) provides that the exemption applies to a mobile telephone provided in a car, van, or heavy commercial vehicle but excludes a cordless or telepoint telephone.

7. New Section 155AA (4)and (5) define a cordless telephone and a telepoint telephone.

8. New Section 155AA (6) defines ‘heavier commercial vehicle’ as in Section 159AC.

9. Subsection (2) provides that the specific mobile telephone charging provision, Section 159A, shall cease to have effect.

10. Subsection (3) makes certain consequential changes to Section 154.

11. Subsection (4) ensures that a mobile telephone is not to be taken into account in calculating the tax charge on accessories included with an employer-provided car.

12. Subsection (5) removes a reference allowing a charge on mobile telephones provided to Ministers and certain other office-holders.

13. Subsection (6) provides that the clause takes effect from 6 April 1999.

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14. The 1991 Finance Act introduced a standard tax charge on the benefit to an employee from the private use of a mobile phone provided by his employer. The standard charge is on £200. There is no charge if there is no private use of the mobile phone, or if the employee reimburses the full cost of any private calls, but the full £200 charge applies otherwise.

15. There have however been continuing representations from employers that this charge can involve disproportionate compliance burdens for them in keeping records of availability and use of mobile phones by employees for tax purposes, particularly where employees wish to reimburse the full cost of private calls so as not to be faced with the tax charge.