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HMRC internal manual

Employment Income Manual

Deductions from earnings: capital allowances: particular items of machinery or plant: mobile telephones, car telephones and in-car entertainment

When a car is supplied complete with ‘extras’ such as a car phone or in-car entertainment, the cost of those items will be included in the cost of the vehicle. Capital allowances for 2001/02 and earlier years can therefore be based on the aggregate cost of the car and extras. For 2002/03 onwards, no tax relief is available for such ‘included’ extras beyond the normal mileage allowance relief for the car in question (see EIM31330onwards).

If it is clear that these items were supplied separately after the car was purchased, then they will qualify for capital allowances if they are necessarily provided for use in the performance of the duties (see EIM36520). This applies for all years. It is possible that a car phone would qualify for capital allowances, but most unlikely that in-car entertainment would do so.

Allowances in respect of the capital cost of a car telephone, or other mobile telephone, should normally be given only where:

  • the employee has a travelling appointment (see EIM32366) and
  • the duties require that the employee should be in contact, or be able to be in contact with others on a continual basis, for business purposes.

As regards the availability of first year allowances for high-tech communication equipment, see EIM36731.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)