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HMRC internal manual

Employment Income Manual

Particular benefits: supplies and services provided other than on the employer’s premises: Internet access in the employee’s home

Employer provides Internet access

Before 6 April 2006 the first £500 of the benefit charge arising on provision by an employer of computer equipment in an employee’s home was exempt from tax under Section 320 ITEPA 2003 (see EIM21700). This exemption did not include fees paid by the employer to an Internet Service Provider (ISP). This exemption was removed by Finance Act 2006.

Section 316 (see EIM21610) exempts from tax assets or services provided by an employer in the employee’s home solely for work purposes, as long as any private use is not significant (see EIM21613).

Where an employer provides for Internet access at the employee’s home solely for work purposes, under a package where there is no separate billing or record of access calls, and no breakdown is possible between work and private calls, we accept that where private use is not significant (and private use does not affect the cost of the package) the costs of connection are exempt from tax under Section 316.

For tax purposes the cost of providing the telephone line to connect to the Internet is a separate matter from the contract between the ISP and the employer or employee. The treatment of the telephone line rental and call charges depends on who has contracted with the provider of the telephone line (see EIM21615).

Employer reimburses employee for the cost of subscriptions to an ISP

Where an employee is the subscriber for Internet access to his or her home, and the employer reimburses the employee for these costs, there is no scope for the exemption in Section 316 to apply, as the employer is not providing a benefit. But where a payment is made by an employer to reimburse an employee for reasonable additional costs (EIM01476) incurred whilst working at home under homeworking arrangements (EIM01472), the payments may be exempt under Section 316A ITEPA.

“Reasonable additional costs” would include a broadband subscription if an employee who had not previously subscribed for broadband needed to do so in order to work from home. Payments to an employee who was already subscribing for broadband, and for whom the cost was therefore not “additional” will not qualify for exemption under Section 316A.

Employee pays for ISP subscription - no reimbursement from employer

If the employee can show that the Internet costs related to use wholly, exclusively and necessarily in the performance of his duties, he may be entitled to a deduction under Section 336 ITEPA 2003 (EIM31620).

However, where an Internet package, such as for Broadband access, provides unlimited access and no separate billing procedures to separate business use from private use, it is not possible for an employee to identify any specific part of the cost as relating to business use. Consequently the position for these packages is the same as for similar mobile phone packages (EIM32945 and EIM32951). If there is no identifiable cost that is wholly and exclusively for business use, no deduction will be due.