Top tax tips: Mobile phone in the company name
Mobile phones are an essential item for the majority of contractors, both for business and personal use. For most people, it’s almost impossible to imagine being able to function properly without one. When it comes to making the most of your tax breaks through your business, one way to make savings is to have your principal mobile phone in the company name, with the company paying both the tariff and the cost of calls. As a company phone is not regarded as a taxable benefit to the employee this is a popular way to enjoy a useful tax free perk through your company.
What are the rules on company mobile phone tax exemption?
To be eligible for this tax exemption HMRC’s rules provide that:
- The phone contract must be in the name of your company (your employer) and not you personally (the employee).
- The phone handset must also be owned by the company, not you personally (double check this particularly if you have a SIM card only contract as you may have purchased a handset separately).
- The exemption only applies to one mobile phone for personal use per director or employee. You can have more than one allowable mobile phone, but just not more than one per person for personal use. If you keep a second mobile, say in your office, and it is used solely for business this will also be allowable.
What’s the difference if I keep my phone in my own name?
If the phone contract is in your own name you are only able to claim the portion of the costs which relate specifically to business use. This can only be done by highlighting relevant calls on an official itemised bill supplied by your service provider and adding up all the call costs. This can be very time-consuming! Also, if the phone contract is in your own name and you decide to claim the full cost of calls through the company this will attract benefit in kind taxation, which can work out to be quite high in some cases. As such, the amounts claimed should be noted on your P11D.
What if I don’t want to buy a new phone or contract?
Many mobile providers will allow you to swap over your contract to the company name, so it’s worth asking if they will do this. If you take this route you should also invoice your company for the handset (basically sell it to the company). This will make it officially the property of your company.
Who can I give company phones to?
The exemption only applies to genuine employees of the business. Be particularly careful if you provide a phone through your business to a spouse or relative. They must be a director or employee of your company to be eligible for this exemption. In addition, you must be able to demonstrate that they perform a genuine work function in the company that would also ordinarily require business use of a mobile phone.
Do all kinds of mobiles qualify for this kind of exemption?
HMRC makes a distinction between devices used primarily for communication purposes and what it classifies as mini-computers. Basic mobile phones and smartphones such as a Blackberry or an iPhone have been approved by HMRC. Tablets and other similar mobile mini-computer type devices are not currently classified as mobile phones. This is the case even if they have the capacity for voice communication (e.g.: via mobile Skype or other VOIP service). However, if such a device is an essential piece of business kit for you this can also qualify for a legitimate tax exemption under computer equipment provided by your company for business use.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.