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HMRC internal manual

Tax Credits Technical Manual

Income: employment income rules - Specific payments and benefits in kind excluded from employment income for tax credit purposes: Provision of home computer equipment

The Tax Credits (Definition and Calculation of Income) Regulations, reg.4 (4) Table 1 (Item 19)

Under the Home Computer Initiative, employers are encouraged to lend computers to employees for use at home. In return for the loan of the computer, the employee gives up some of his/her salary, effectively a salary sacrifice scheme. In these circumstances the salary sacrifice is valid for tax credit purposes.

Loaned computers do not count as employment income for tax credit purposes.

The partial computer exemption in s320 of ITEPA was abolished with effect from 6 April 2006.

Some employees, who entered into an arrangement of this type before this date continue to benefit from this partial income tax/tax credits exemption (of up to £500 a year) as they typically lasted around three years. There will be very limited numbers of these cases in future

Provision of mobile telephones

The Tax Credits (Definition and Calculation of Income Regulations, Reg. 4(4) Table 1 (Item 11F)

The provision of one mobile telephone for an employee if no liability arises under section 319 of ITEPA


Note: With effect from 6 April 2017 the way in which many salary sacrifice and benefit in kind schemes are taxed will change, which means that some tax credit claimants will see an increase in their taxable income.

For the purposes of tax credits, where one of these schemes is in operation the taxable income figure should be used.