Charging your business for mobile phone costs
Nearly everyone has a mobile phone these days (OK - my mother-in-law doesn't but she really is the exception!) and with the increase in Smartphones these are becoming more and more invaluable to businesses.
But how should you claim these costs for your business?
Sole Trader or Partner
If you're trading as a sole trader or a partner in a business, you basically have two choices for charging mobile phone costs to your business:
- Have two phones with one exclusively for work. You can then claim all the costs relating to the work phone through your business (including claiming the VAT element against your VAT bill if you're VAT registered and not on the VAT flat rate scheme).
Whilst it might be the simplest method, we've rarely seen a business owner do this in practice - the main reason being that this doubles the cost of having a mobile phone!
- Have one phone and work out a reasonable split of your bills (and VAT) between business and personal. You can do this whether you pay for individual calls or have an all-inclusive contract.
If your call usage is fairly regular then you can work out this split over a period of, say, 3 months. Go through your calls line by line and highlight your business calls (or personal calls if you've got less of these!). Then calculate the business calls vs the total calls. Apply this percentage to your total mobile phone costs - including line rental and VAT.
This won't be 100% accurate each month but as long as your calculations are reasonable (and you can show these to the taxman should the need arise), you shouldn't have any problems.
If your call usage fluctuates massively each month then you may need to do this on a monthly basis. Again, you don't need to be 100% accurate but your calculations should be reasonable and you should be able to show these to the taxman if he asks.
The tax treatment for a company claiming mobile phone costs is sightly different. Since 2012 your company has been able to provide staff and directors with one smartphone each. As long as the contract is in the company's name, and there is some element of business use, then the phone can be used for both business and personal calls without resulting in a taxable benefit in kind charge on the employee.
The company can also claim back the VAT against its VAT bill (unless it's using the VAT flat rate scheme).
So what happens if your mobile phone is in your personal name?
Well, you can ask your phone provider to transfer the contract into your company's name (get permission to do this if you're just an employee!) or take out a new contract in the company's name. The downside of this is that the phone providers often charge more for contracts with businesses than they do for contracts with individuals. However the tax savings may more than justify the increased costs.
So what if you don't want to transfer the phone into the company's name?
Well, if you pay for your calls separately then you can charge the company for any of these calls which were business related - including charging the VAT element.
But beware, if you're on an all-inclusive contract, then you can't charge the company with your calls as there is no cost to you! So in this case it may well be more tax efficient to take out a new contract in the company's name.
If you'd like further advice as to what expenses you can and can't claim feel free to get in touch.