All companies are able to provide each of their employees (including directors) with one mobile phone. This is treated as a tax-free benefit, even if the phone is used mostly for personal use. However, in order to receive this benefit:
1) The phone contract must be between your company and the network provider (i.e. a business contract);
2) The bills must be addressed to the company and paid directly by the company.
There are several permutations that we often see:
Personal contract in the director’s name (or employees) but is paid for by the company:
- The exemption does not apply and the company will need to pay national insurance on the personal benefit that the director (or employee) receives from having a mobile phone that is paid by the company.
- To avoid the national insurance charge we could make an accounting adjustment to remove the personal element from the phone bill by adding it to your director loan account. As employee do not have loan accounts they would typically need to reimburse the company.
Personal phone contract paid personally but the phone is used in the business
- We would need to make an accounting adjustment each year to include the business element of your phone bill in the company accounts.
- For example if your personal phone contract is £50 per month and the phone is used mostly for business we would put a proportion (ranging from 80% to 90%) of those costs through the business.
- You would need to let us know what these costs are as we would not typically have sight of them (we monitor the company's but not your personal bank account).
Business phone contract paid by the business
- This is the optimal solution. No accounting adjustments are required and no taxable benefits arising. Maximum tax and accounting efficiency!
tl;dr in order to receive the full tax benefits from having a business phone, you’ll need to be on a business contract with your provider, with the contract in the name of your company, and all bills paid for directly by the company.