Budget 1999: Phones - Burden eased for mobile users

The Budget and Business

IT WAS Norman Lamont, the Tory Chancellor, who, in the 1991 Budget, imposed a tax on what he considered a growing menace: mobile phones.

Apparently annoyed by so-called yuppies shouting noisily into their mobiles, he gleefully announced he was going to tax them.

As a result, any individual provided with a mobile phone by an employer has been taxed.

Yesterday, the Chancellor announced he was scrapping the tax charge as of 6 April, removing "the unwelcome record-keeping and reporting burden on employers".

It is estimated this will benefit up to 350,000 individuals and will be worth pounds 80 to people on the higher tax code and pounds 46 to those on the standard rate.

The decision removes the difficulty faced by both employers and employees in trying to work out which calls were for business and which were for pleasure.

Under the old guidelines, employees could escape liability if they made no private use of the phone or re-imbursed the full cost of such calls.

According to details in yesterday's Budget documents: "That imposed further unwelcome compliance burdens on employees and employers."

The move is, perhaps, also a recognition that, since 1991, mobile phones have increasingly become less of a luxury for the wealthy and more of an important tool for work and business.

Neither companies nor individuals will have to do anything to fall in line with the new arrangements, which will cost the Government about pounds 25m a year. From May, Pay As You Earn codes will be altered to remove the tax charge.

It was also announced yesterday that telecommunication companies looking to buy licences to operate third- generation mobile phone services will receive tax relief.

It is expected that, by the end of the financial year, an auction will have been held for a series of licences that will operate for 20 years.

Tax relief will be spread over the life of the licence and will be legislated in 2000. The measure is designed to ensure consistent tax treatment for mobile communication services.