Tax implications of using the company PCs for play


P

pete

One organisation I do some work for is looking into the tax
situation apropos the staff using company PCs and internet
connections for non-work related reasons.
While the company doesn't explicitly object to this, provided
the job gets done (though there are some costs, see later) they
are concerned that this use could be considered a benefit in
kind and therefore be a taxable liability that they haven't
accounted for.
There is a business need for internet access, just not to everyone
and not for their personal use.

Briefly, there are about 70 - 80 employees who have PCs on their
desks. While these are needed for their jobs - which isn't a
consideration, the employees do use them for personal reasons
such as surfing, emailing, facebook etc.
The executive opinion is that this is roughly 3 or 4 hours per
person per week, which adds up to about 10,000 hours of non-
work related (and free) usage per year. Even if you only cost
the benefit at £1 per hour, then for the last few years there
could be an unexpected tax bill that would be a severe loss.
There's also a factor that (maybe) 200 hours a year of IT time
is needed to fix problems such as viruses & other security issues
that would not arise if staff weren't using the internet in
uncontrolled ways. The cost of this far outweighs the pounds-per-
hour and if the Revenue decided to include this in the tax bill
it would at least treble.

What are the views on if this is a practical problem, or just an
maginary scare? Also, what can be done in the future to mitigate
any liabilities - should the Co. start declaring a BIIK for these
employees and making deductions accordingly?
 
J

jeff

pete said:
One organisation I do some work for is looking into the tax
situation apropos the staff using company PCs and internet
connections for non-work related reasons.
While the company doesn't explicitly object to this, provided
the job gets done (though there are some costs, see later) they
are concerned that this use could be considered a benefit in
kind and therefore be a taxable liability that they haven't
accounted for.
There is a business need for internet access, just not to everyone
and not for their personal use.

Briefly, there are about 70 - 80 employees who have PCs on their
desks. While these are needed for their jobs - which isn't a
consideration, the employees do use them for personal reasons
such as surfing, emailing, facebook etc.
The executive opinion is that this is roughly 3 or 4 hours per
person per week, which adds up to about 10,000 hours of non-
work related (and free) usage per year. Even if you only cost
the benefit at £1 per hour, then for the last few years there
could be an unexpected tax bill that would be a severe loss.
There's also a factor that (maybe) 200 hours a year of IT time
is needed to fix problems such as viruses & other security issues
that would not arise if staff weren't using the internet in
uncontrolled ways. The cost of this far outweighs the pounds-per-
hour and if the Revenue decided to include this in the tax bill
it would at least treble.

What are the views on if this is a practical problem, or just an
maginary scare? Also, what can be done in the future to mitigate
any liabilities - should the Co. start declaring a BIIK for these
employees and making deductions accordingly?
I suspect that as long as the companies rules state that the PC's
should not be used for personal reasons then the company is in the clear
as far as benefits are concerned.

May be they should find one or two of the worst offenders and issue them
with warnings just to be on the safe side.

Jeff
 
Ad

Advertisements

H

harikeo

pete said:
One organisation I do some work for is looking into the tax
situation apropos the staff using company PCs and internet
connections for non-work related reasons.
While the company doesn't explicitly object to this, provided
the job gets done (though there are some costs, see later) they
are concerned that this use could be considered a benefit in
kind and therefore be a taxable liability that they haven't
accounted for.
There is a business need for internet access, just not to everyone
and not for their personal use.

Briefly, there are about 70 - 80 employees who have PCs on their
desks. While these are needed for their jobs - which isn't a
consideration, the employees do use them for personal reasons
such as surfing, emailing, facebook etc.
The executive opinion is that this is roughly 3 or 4 hours per
person per week, which adds up to about 10,000 hours of non-
work related (and free) usage per year. Even if you only cost
the benefit at £1 per hour, then for the last few years there
could be an unexpected tax bill that would be a severe loss.
There's also a factor that (maybe) 200 hours a year of IT time
is needed to fix problems such as viruses & other security issues
that would not arise if staff weren't using the internet in
uncontrolled ways. The cost of this far outweighs the pounds-per-
hour and if the Revenue decided to include this in the tax bill
it would at least treble.

What are the views on if this is a practical problem, or just an
maginary scare? Also, what can be done in the future to mitigate
any liabilities - should the Co. start declaring a BIIK for these
employees and making deductions accordingly?
If things are becoming a problem the company could block access to all
sites other than work-related ones.

You could also stop users being local admin on the PCs so they can't run
executables/scripts etc. That would cut down the time spent cleaning
machines.

Education is another area..... users tend to click "yes" to everything
because they tend to not understand what they're doing and if they're
local admin on the machine it could spell disaster.
 
R

R. Mark Clayton

IMHO this is not an issue, even if the computers are in the employees' home
offices.

There is no marginal cost (to the employer) of the provision of the
equipment (indeed for a while employers could provide PC's to employees tax
free).

There is no marginal cost to the employer for the cost of extra use of a
business broadband connection (usually 24/7 unlimited). There might be a
small issue if a mobile broadband connection was used.

It would be a simple matter to account for a 'nil' additional cost.

The electricity is a very small cost and would fall on the employee if at
home.

In any event you should have an employee use policy (no crime, porn etc. and
no streaming).


OTOH you are dealing with HMRC for whom the epithet "unreasonable thieving
heartless barstards" is simultaneously unfair to the fanatical, dishonest,
unsympathetic and illegitimate - remember Atlantic Computers (just for one).
Perhaps they will suggest charging employees for sitting at their desks
during breaks...



PS this is similar in a way to Lawson's ridiculous and arbitrary £200pa
business mobile phone charge (because he didn't like them ringing in
restaurants). In my case the capital cost was long amortised and the annual
contract cost less than half that and covered all calls (including a handful
of personal ones)! As this was in a Finance Act, I used to pay a modest
amount every year for any personal use and avoid the £200 BIK charge (=£80).
 
A

Adrian

There's also a factor that (maybe) 200 hours a year of IT time is
needed to fix problems such as viruses & other security issues that
would not arise if staff weren't using the internet in uncontrolled
ways.
If the IT department were doing their job properly, it wouldn't matter
what the staff were doing, the infrastructure would be protected.
 
R

Ronald Raygun

R. Mark Clayton said:
IMHO this is not an issue, even if the computers are in the employees'
home offices.

There is no marginal cost (to the employer) of the provision of the
equipment (indeed for a while employers could provide PC's to employees
tax free).

There is no marginal cost to the employer for the cost of extra use of a
business broadband connection (usually 24/7 unlimited). There might be a
small issue if a mobile broadband connection was used.
Whilst I broadly agree with you, is there not a potential issue of the loss
of time? If the employee is being paid to work full-time but spends on
average a total of half a working day per week on private business, is this
not equivalent to taking half a day off each week (POETS-fashion perhaps),
so that the employees are in effect being overpaid to the tune of one ninth?

Although the OP has stipulated that the employer doesn't object provided
"the work gets done", there remains the issue that the staff are in effect
underused, and they could in theory either be given 1/9 more work to do
or given a 10% salary cut. In that sense there *is* a marginal cost to the
employer (but luckily this is not a tax issue, since the salary overpayment
is already being taxed). Of course there is a counter-argument that all
work and no play would reduce the workers' efficiency in terms of producing
high quality work, so perhaps there really is no marginal cost after all.
 
S

Steve Firth

Adrian said:
If the IT department were doing their job properly, it wouldn't matter
what the staff were doing, the infrastructure would be protected.
Umm yes, that was what I was thinking. In fact if that job were being
done properly the staff would not be able to access inappropriate sites
at all and that should include a block a webmail, shopping, social sites
etc. People are being paid to work, not to much about and indulge their
social lives.

If the "executive opinion" is that staff are wasting 3-4 hours per week,
I think it's a fair bet that the real figure is 3-4 hours per day.

It's incredible to me that the IT staff simply seem to be sitting around
not doing their job and are fire fighting after the event rather than
having in place a sensible IT policy and a properly implemented
infrastructure.

As to the IR consequences, I think that's a red herring. The company has
biggger issues to face up to first.
 
R

R. Mark Clayton

Ronald Raygun said:
Whilst I broadly agree with you, is there not a potential issue of the
loss
of time? If the employee is being paid to work full-time but spends on
average a total of half a working day per week on private business, is
this
not equivalent to taking half a day off each week (POETS-fashion perhaps),
so that the employees are in effect being overpaid to the tune of one
ninth?

Although the OP has stipulated that the employer doesn't object provided
"the work gets done", there remains the issue that the staff are in effect
underused, and they could in theory either be given 1/9 more work to do
or given a 10% salary cut. In that sense there *is* a marginal cost to
the
employer (but luckily this is not a tax issue, since the salary
overpayment
is already being taxed). Of course there is a counter-argument that all
work and no play would reduce the workers' efficiency in terms of
producing
high quality work, so perhaps there really is no marginal cost after all.
As you say paid unproductive time is not a tax issue. Company policy should
state that use during working hours should be incidental (e.g. receiving
family email, booking tickets etc.) and any other use should only be during
breaks etc.

It will be interesting to see whether HMRC go up this blind alley. Their
usual route is to make the employer / tax-payer responsible for a snowstorm
of paperwork. For instance one can escape the company car charge if one
keeps detailed records of all journeys, their purpose and settles up for
them... OTOH with sat nav this is a lot easier.
 
A

Adrian

%steve%@malloc.co.uk (Steve Firth) gurgled happily, sounding much like
they were saying:
Umm yes, that was what I was thinking. In fact if that job were being
done properly the staff would not be able to access inappropriate sites
at all and that should include a block a webmail, shopping, social sites
etc. People are being paid to work, not to much about and indulge their
social lives.
I'm ambivalent about that. Technical measures to prevent people wasting
time rarely work - they'll merely start nattering amongst 'emselves, or
spending hours on the phone or just staring into space (like what they
used to do to waste time years ago, before the internet). Except now
motivation and morale will be down, too.
It's incredible to me that the IT staff simply seem to be sitting around
not doing their job and are fire fighting after the event rather than
having in place a sensible IT policy and a properly implemented
infrastructure.
And that's the important bit. Build the infrastructure properly, and it
won't matter what people are doing - it'll be secured.
 
S

Steve Firth

Adrian said:
%steve%@malloc.co.uk (Steve Firth) gurgled happily, sounding much like
they were saying: [snip]
Umm yes, that was what I was thinking. In fact if that job were being
done properly the staff would not be able to access inappropriate sites
at all and that should include a block a webmail, shopping, social sites
etc. People are being paid to work, not to much about and indulge their
social lives.
I'm ambivalent about that. Technical measures to prevent people wasting
time rarely work - they'll merely start nattering amongst 'emselves, or
spending hours on the phone or just staring into space (like what they
used to do to waste time years ago, before the internet). Except now
motivation and morale will be down, too.
Oddly, that's not been my experience. And TBH the sort of people who
will do that aren't that productive anyway and might be best encouraged
to do something else.

Most places I work have fairly clearcut rules about "no browsing alcohol
and tobacco related sites, no porn, no racist sites, definitely no
warez, no installing software of your own choosing, no social sites, no
irc/IM, no eBay, no gaming" and it generally works fine. Of course that
is then backed up by hardware appliances to enforce those restrictions
and software systems to prevent abuse (e.g. not permitting software to
be installed from USB keys for example).
And that's the important bit. Build the infrastructure properly, and it
won't matter what people are doing - it'll be secured.
Indeed, and my image of the IT group in this case consists of people
wearing stetsons and boots with spurs.
 
A

Adrian

%steve%@malloc.co.uk (Steve Firth) gurgled happily, sounding much like
they were saying:
Oddly, that's not been my experience. And TBH the sort of people who
will do that aren't that productive anyway and might be best encouraged
to do something else.
Oh, sure. But often the wasters are the ones with the occasional "flashes
of brilliance" who actually drive things forward. When they extract
digit...
Most places I work have fairly clearcut rules about "no browsing alcohol
and tobacco related sites, no porn, no racist sites, definitely no
warez, no installing software of your own choosing, no social sites, no
irc/IM, no eBay, no gaming" and it generally works fine. Of course that
is then backed up by hardware appliances to enforce those restrictions
and software systems to prevent abuse (e.g. not permitting software to
be installed from USB keys for example).
Different organisations, different cultures. Many I work with are in much
more laid back industries, and are perfectly happy with the "As long as
the job gets done..." approach. Wasting "office time" on the really
objectionable sites will just be a symptom of the kind of person who will
find themselves on the way out in short order anyway...
Indeed, and my image of the IT group in this case consists of people
wearing stetsons and boots with spurs.
Nah, it's just the far-too-common SME attitude of "We've got a £50 router
and Norton, why would we need anything else on our SBS network?", I
suspect. Trouble is, far too many supposedly professional IT shops exude
that attitude, too.
 
Y

Yellow

harikeo [nomail@home.net] said:
If things are becoming a problem the company could block access to all
sites other than work-related ones.
Unless the business just uses a few sites with known urls that can be
white listed, this is a game that always ends up with total confusion
because sites get blocked, or not blocked, inadvertently. This leaves
the employees with a mixed message that states if it is not blocked it
is OK to access and if it is blocked accidentally, work can go hang.

The better path is block obvious sites - facebook etc - and then issue a
policy telling people that using the computer, in work's time, for non-
work reasons is a disciplinary issue. This will not stop people using
the internet for their own use, but it will perhaps put a bit of a limit
on it and, most importantly, everyone knows where they stand.
 
G

Gary Baldi

Unless the business just uses a few sites with known urls that can be
white listed, this is a game that always ends up with total confusion
because sites get blocked, or not blocked, inadvertently.
Indeed; the company I used to work for was owned by Daily Mail General
Trust and one day we found the Mail's own website blocked.

Which some of you might not think a bad idea...........
 
M

Mr Pounder

pete said:
One organisation I do some work for is looking into the tax
situation apropos the staff using company PCs and internet
connections for non-work related reasons.
While the company doesn't explicitly object to this, provided
the job gets done (though there are some costs, see later) they
are concerned that this use could be considered a benefit in
kind and therefore be a taxable liability that they haven't
accounted for.
There is a business need for internet access, just not to everyone
and not for their personal use.

Briefly, there are about 70 - 80 employees who have PCs on their
desks. While these are needed for their jobs - which isn't a
consideration, the employees do use them for personal reasons
such as surfing, emailing, facebook etc.
The executive opinion is that this is roughly 3 or 4 hours per
person per week, which adds up to about 10,000 hours of non-
work related (and free) usage per year. Even if you only cost
the benefit at £1 per hour, then for the last few years there
could be an unexpected tax bill that would be a severe loss.
There's also a factor that (maybe) 200 hours a year of IT time
is needed to fix problems such as viruses & other security issues
that would not arise if staff weren't using the internet in
uncontrolled ways. The cost of this far outweighs the pounds-per-
hour and if the Revenue decided to include this in the tax bill
it would at least treble.

What are the views on if this is a practical problem, or just an
maginary scare? Also, what can be done in the future to mitigate
any liabilities - should the Co. start declaring a BIIK for these
employees and making deductions accordingly?
You are at work to work and not to play with stupid Facebook etc.
I would sack any person using my computers for private use.
No wonder the country is disappearing down the toilet.

Mr Pounder
 
M

Mike Granby

There is no marginal cost (to the employer) of the provision of the
equipment (indeed for a while employers could provide PC's to
employees tax free).
But a cell phone provided to an employee on an unlimited or high-limit
calling plan would mean their would be no marginal cost to the
employer in allowing personal calls, but it would still create a
taxable benefit, wouldn't it?
 
T

tim....

R. Mark Clayton said:
As you say paid unproductive time is not a tax issue. Company policy
should state that use during working hours should be incidental (e.g.
receiving family email, booking tickets etc.) and any other use should
only be during breaks etc.

It will be interesting to see whether HMRC go up this blind alley.
I don't think that they have any intention of so doing

ISTM that it is only the OP (or his employer) who has introduced the
question of a tax assessment to this issue

As you and RR have said, there is none so it is the OP ('s employer) who is
the one going up the blind alley

tim.
 
F

Fredxx

tim.... said:
I don't think that they have any intention of so doing

ISTM that it is only the OP (or his employer) who has introduced the
question of a tax assessment to this issue

As you and RR have said, there is none so it is the OP ('s employer)
who is the one going up the blind alley
RR was talking about tax on pay whilst "playing". Is there not a tax
liability for the employer and employee for Income Tax and NI for benefit in
kind, on equipement not wholly and exclusively used for work?
 
S

Szymon von Ulezalka

You are at work to work and not to play with stupid Facebook etc.
I would sack any person using my computers for private use.
No wonder the country is disappearing down the toilet.
It's hard not to agree with main idea of your post, but- from the
other hand- a bit of relax (sure... facebooking could be a relax to
someone) increase productivity (think about Google and its '20%
rule'). why (apart from technical reasons) office-workers shouldn't
have an access to whole Internet in their break-time?
 
P

pete

As you say paid unproductive time is not a tax issue. Company policy should
state that use during working hours should be incidental (e.g. receiving
family email, booking tickets etc.) and any other use should only be during
breaks etc.

It will be interesting to see whether HMRC go up this blind alley. Their
usual route is to make the employer / tax-payer responsible for a snowstorm
of paperwork. For instance one can escape the company car charge if one
keeps detailed records of all journeys, their purpose and settles up for
them... OTOH with sat nav this is a lot easier.
Thanks for the considered opinions, guys. My role has been from an IT / fact-
gathering position inside the company. Trying to get a handle on the amount
of use (tho' not from individuals, in a witch-hunt sort of way).
The question was originally posed before xmas by the finance director (who
might just have been eating too much cheese before bedtime) about the possibliity
of an unexpected exposure - not because HMRC was on the war-path.
I like the idea of a parallel with staff use of company phones for personal
calls. Since these don't seem to incur the wrath of the gummint I am going to
suggest to the FD that internet use should be thought of in a similar way. Maybe
that'll allay her fears a bit.
I would expect the accountant has also been asked for an opinion, it'll be
interesting to hear that side, too.
HNY.
 
Ad

Advertisements

F

Fredxx

pete said:
Thanks for the considered opinions, guys. My role has been from an IT /
fact-
gathering position inside the company. Trying to get a handle on the
amount
of use (tho' not from individuals, in a witch-hunt sort of way).
The question was originally posed before xmas by the finance director (who
might just have been eating too much cheese before bedtime) about the
possibliity
of an unexpected exposure - not because HMRC was on the war-path.
I like the idea of a parallel with staff use of company phones for
personal
calls. Since these don't seem to incur the wrath of the gummint I am going
to
suggest to the FD that internet use should be thought of in a similar way.
Maybe
that'll allay her fears a bit.
I would expect the accountant has also been asked for an opinion, it'll be
interesting to hear that side, too.
HNY.
One very big difference, phones and mobile phones have been a tax free perk
for years, computer equipment is not a tax free perk for personal use.
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top