Corporation Tax, Personal Tax

Mobile phone expenses: Limited company Director

Luke Fletcher

Luke spent a decade at two of the UK’s largest accounting firms delivering tax advice to household names. Frustrated by the lack of tax advice offered to small businesses, and the 'once a year' compliance led approach from most traditional accountants Luke set up Raw. Using his experience, Luke now helps owner managed and entrepreneurial businesses take back control of their finances through simple, jargon-free advice. As an ICAEW Chartered Accountant and tax advisor, Luke loves nothing more than helping his clients pay less tax and maximise their earnings. Commercially minded and pragmatic, Luke prides himself on building long lasting, trusted client relationships.

May 25, 2021

A question we get asked regularly by Limited company Directors is whether they can put their mobile phone expenses through their limited company tax free. Like most things, it depends! In this article we explore when a Director’s mobile phone can be tax free.

When are mobile phones tax free

A company can provide an employee or Director with one mobile phone without giving rise to a taxable benefit. However, in order for this to be the case the contract must be in the company’s name as opposed to in the name of the Director or employee.

The benefits of this are that the company can take a corporation tax deduction for the cost of the mobile phone contract, and if it is VAT registered it can claim back any VAT suffered. In addition, there are no tax implications for the Director or employee, meaning it’s tax free for them.

What most Director’s tell us is that the business contracts provided by mobile phone companies are more expensive, and they want to keep it in their personal name. Firstly, you should make sure your comparing apples with apples – although the contract may be more expensive you will get a corporation tax deduction and be able to reclaim the VAT – reducing the overall cost to the business. But we understand sometimes the business contracts are still more costly, so are there any other options to put the mobile phone expenses through the limited company?

Can the company pay the Director’s mobile phone bill

The short answer is no, not without triggering a taxable benefit.

Basically, if the contract is in the Director’s name and the company pays it then that is a taxable benefit and should be reported on form P11D. In which case, there is little point having the company pay it as the net impact is broadly the same if the Director paid it themselves.

Can the company reimburse the Director for the mobile phone cost

If the company pays the Director to reimburse them for the mobile phone cost, then this is no different to employment earnings and therefore taxed as such. It is grossed up via the payroll so that the net amount after tax is equal to the cost of the mobile phone bill. Again, in this case there is little point having the company pay it as it’s subject to tax.

Put the contract in the company name

In short, the best tax outcome is to put the contract in the company name. We know some contracts can be expensive, but there are cheaper options. With many people keeping phones for longer, you may be able to take out a sim only business deal in the name of the company. There are cost effective plans, such as these from Tesco, that enable you to get all the tax breaks without breaking the bank. It’s time to shop around for the best business deal.

When it comes to mobile phone expenses in a limited company that’s really all you need to know. But if you’ve got a question on mobile phones or need a hand with a tax query, just get in touch with us, we’re always happy to have a chat.