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Published 13 September 2021
HMRC expenses rules state that you can make available for use to an employee one mobile phone for business purposes, which is exempt from tax on the individual as a Benefit in Kind (BIK) and a legitimate allowable expense against corporation tax. Rules vary depending on the chosen model. Let’s see what the optimal model is.
Claiming tax relief on a mobile phone
If an employee has more than one handset, or handsets are provided to family members who are not employees of the company, then these extra handsets will be taxed as a BIK (paid by the employee), although the company would be able to claim the cost of the additional phone as an expense against corporation tax.
HMRC accepts that most companies will provide its employees with one mobile phone. If the company purchases the phone and the contract is in the company name, then the company can claim expenses relating to the purchase, contract, and call costs on these mobile phones. If the phone is not in the company name, then the company cannot claim for the purchase of the handset or the costs of the tariff itself.
Should the phone contract be in the company name?
Having the phone in the company name, as well as the bills, is typically the optimal model, as the cost of the phone, the monthly contract amount, and the cost of the calls over and above the monthly tariff are available for tax relief.
Paying for the phone and for the monthly bills through the company business account, or with the company credit card, is also the optimal model. This way, it is clear that the company purchased, and is running the phone from a financial perspective.
What if I purchase a pay-as-you-go phone in the company name?
With regard to pay-as-you-go top-ups, ensure that all calls are logged that are relevant to business. Remember that you should only claim for calls made for business purposes, and if asked, you would need to be able to produce records to prove that the calls for which are being claiming were business related.
The cost of the handset will be a deductible expense for the company.
What if purchase a mobile phone and a contract in my personal name?
Purchasing a mobile phone in your personal name means that you cannot claim the cost of the handset purchase as a company expense.
If you take on a phone contract in your personal name, you will not be able to claim the tariff as a business expense either. Only the costs of the additional call charges that are business related can be claimed, and you must ensure that all call charges that relate to business are highlighted on the telephone bill in order to make a claim as a business expense.
Maximising tax relief
It is much better to purchase a mobile phone and contract in the company name, through the company bank account, or with the company credit card.
Each employee may have one mobile phone handset. This is the best practice and ensures that you can claim the maximum in expenses and the company can claim the cost of the whole bill, even if there is an element of personal calls included.