All unincorporated businesses, including sole traders, the self-employed and trading partnerships, will be taxed on…
During the last few months, to assist workers with working from home, many businesses have supplied a work mobile phone, but how should they account for this benefit?
Typically, the provision of equipment, such as a mobile, could be considered a benefit in kind for tax purposes, however, an employee can benefit from an employer-provided mobile phone without suffering a tax charge where certain conditions are met.
Under the rules, to avoid a tax charge via benefit in kind, the ownership must not be transferred to the employee, as the exemption applies only if the employer makes a mobile phone it owns available for use by the employee.
This exemption only covers the supply of a single mobile phone to each employee, the line rental and the cost of any private calls made on the phone, which are paid for by the employer.
Where the mobile phone (or sim card) is registered in a company name, all the costs can be claimed, with the proviso that ‘personal use’ must be ‘reasonable and not excessive’. Meanwhile, the phone itself counts as a company asset.
In some cases, a home-working employee may have been allowed to or decided to use their own personal device to make business calls.
Where a phone contract is personal, i.e. not registered to the company, then there are two main ways to treat the expense:
- Where a company pays for the bills and the phone, it is counted as a ‘benefit in kind’ and the costs have to be reported via the P11D form and there will be National Insurance contributions (NICs) to pay.
- Where an employee pays for the phone and bills, deductions have to made on PAYE and Class 1 NICs on the value of the monthly contract, plus any personal calls that may add costs over the normal monthly tariff.
In both of these scenarios, VAT can only be claimed on the business costs.
Businesses should also consider the potential security risks of a person using their own devices, such as the accessibility of sensitive data by other persons, and should have an agreed policy on phone use, which could be part of a home working agreement.