October 30th, 2012 / Insight posted in

It’s simpler to give staff a mobile

FI writes: We are thinking of cancelling our mobile phone plan and letting employees use their own phones with a set payment each month to cover costs. Will there be any problem with tax?

If the company provides employees with mobile phones (as long as it is only one per person), there is no taxable benefit on their use, even if private calls are made, writes Jon Sutcliffe, partner at Kingston Smith LLP. The costs are an allowable expense for tax purposes.

However, if an employee uses a personal mobile for business calls and is paid an allowance, this sum will be included in the payroll and incur both PAYE and NI charges.

Theoretically, employees can claim tax relief for the cost of any business calls, as long as records of some variety are maintained to back up the claims. This would only be the case when the phone is not attached to a fixed tariff or when employees exceed the free minutes provided by their fixed tariff because of business calls.

If the employer merely reimburses the additional costs of business calls, they should be included on the P11D as an expense and be fully claimable by the employee — or could be covered by a dispensation. Once again, that would probably require itemised bills. Reimbursement of any private element is a payroll matter, as above.

Generally, it is much simpler to provide your employees with mobile phones. There is a good summary of HM Revenue & Customs’ position on its website at www.hmrc.gov.uk