North East businesses may find themselves liable to a tax charge for employee’s personal internet and email use, due to new legislation.

The tax bill is likely to be raise around £730 million a year for the Treasury.

Moreover, businesses may also find themselves responsible for auditing the email and internet usage of individual staff, noting all personal email and logging all websites visited, or find that they are liable for a charge during a PAYE audit.

Critics argue it will be virtually-impossible to enforce.

Stealth tax

Under measures slipped quietly into the March Budget, personal use of company computers will be classed a 'taxable benefit'.
 
Under the terms of the 2006 Finance Bill, businesses face the possibility of the stealth tax if they allow ‘significant’ use of equipment, for personal tasks such as e-mailing or surfing the internet.

This is the result of Gordon Brown's decision to drop the Home Computing Initiative (HCI), a tax incentive that allowed workers to buy computer equipment through their employers at discounted rates.

Bureaucratic burden

Small businesses are most likely to feel the brunt of the new rules as they will have to divert valuable time and resources to monitoring computer use.

Bigger businesses are likely to already have such systems in place.

Anne Redston, chairman of personal taxes for the Chartered Institute of Taxation, said that the changes represent "a new bureaucratic burden" on business owners.

She said that removing the Home Computing Initiative (HCI) from the 2006 Finance Bill would make employers liable for more national insurance contributions, and employees liable for higher income tax.

"Policing this would be a really big burden," said Redston. "Employers would have to audit Internet use, otherwise during a PAYE audit they would be liable for a charge."

The Treasury rejected the claims that the Finance Bill contains a stealth tax on the personal use of computers at work.

A spokesperson said: “If an employee needs a computer for work it’s not a benefit in kind, and so it’s free of charge.”

Relevant links

Chartered Institute of Taxation 

AOL and Yahoo want to charge businesses for delivering their emails

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