UK based Telecom Expense Management consultant, Aurora Kendrick James, is warning that Apple's much anticipated iPhone might actually trigger a long predicted reassessment of the tax status of some 3 million business mobile phones when it finally hits the UK market later this year.
HM Revenues & Custom has already reclassified Personal Digital Assistants stating that "technology has developed to such an extent that PDAs and Blackberrys now have additional functions more typically associated with a computer and so can no longer be considered primarily as a mobile phone."
Now, according to AKJ's MD, Matt Atkinson, the iPhone could be an unwitting catalyst of change when the taxman considers the business mobile phone market.
"As things stand, fully expensed mobile phones provided to staff for business use are free of income tax liability and not seen as a benefit in kind. However in a technology driven market, mobile phones are becoming increasingly like a personal computer which is treated very differently for tax purposes.
"With HMRC already bracketing PDAs and Blackberrys alongside PCs, the iPhone could be about to herald a further re-think of the tax situation," he warns.
"If there is significant personal usage of the iPhone - and its music heritage and consumer features are all driven towards leisure usage - it would be very hard to argue that it should not be treated as a benefit in kind and subject to income tax."
The iPhone has generated much industry comment and excitement as it seeks to use the power of the Apple brand to challenge the dominance of mainstream players such as Nokia, Motorola, Samsung and Sony Ericsson. But its effect on the market could be more far reaching than even the most die-hard Apple fans predict.
Because as the rival manufacturers seek to rebuff the new entrant, a whole host of "smart phone" style devices are hitting the market blending consumer and business features in one device.
"Motorola's Z8, Nokia's E65 and other models like them are phones packed with leisure features alongside business applications such as push corporate email. The line between a personal benefit and a business requirement is becoming very blurred and the taxman is without doubt watching this space," says Atkinson.
"One of the shifts in the market the iPhone might achieve, is to increase the tax liability on mobile phones for some 3 million corporate mobile phone users, and without proper management control and access to information, businesses will find it increasingly hard to apportion costs," he adds.
This shift in the market would also result in the need for accurate inventory management as each mobile device would need to be declared on tax forms adding to the mass of paperwork to be completed. AKJ believes that education and visibility of costs to users are pivotal in the process and that by putting in place a company policy, staff can be manage their costs and potential liabilities against sensible guidelines.
Atkinson concludes: "Next time a business looks to replace their mobile phones they need to consider the type of business phone to purchase and the potential tax implications. Implementing a mobile expense management policy will control and reduce personal usage but will also help with personal tax liability, VAT compliance, validating invoices, tariff negotiation, management and inventory reporting; all of which will mean a more cost effective and controlled mobile estate.""
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