Not many people remember Norman Lamont's infamous tax on mobile phones. It was back in 1991 when mobile phones were huge chunky things and City types used to shout on them in bars and restaurants. Apparently Lamont was so annoyed by this that he slapped a £200 charge on their private use as a benefit-in-kind. Of course it didn’t work as there was no way to disprove that the phones were unavailable for private use or that domestic calls had not been fully reimbursed, so the tax was finally withdrawn in April 1999.
The position now is that you can make as many personal calls as you like on a company mobile phone without it being a taxable benefit. There are only 2 conditions:
- The mobile phone itself must belong to the company
- The contract with the operator must be in the name of the company
It is the second of these conditions that most self-employed people fall
down on. It is amazing how many of them use their own mobile and get
their company to pay the bills, blissfully unaware that they are turning it
into a taxable benefit. One piece of advice – ask the mobile operator to
switch the contract into the name of your company and make sure all
the bills are addressed to it too. That’s all it takes to avoid a completely
unnecessary tax bill.
For pay-as-you-go phones, you can claim for top-ups provided the
handset belongs to the company. That should not be difficult as all you
need to do is put the original cost through your loan account and raise
an invoice from yourself to your company.
Not to be outdone by his illustrious predecessor, Gordon Brown
introduced his own rule on mobile phones in April 2006. He decreed
that an employee and his/her immediate household could only be
given one tax free mobile phone between them by their company. Any
others would be taxed as a benefit-in-kind. However, you are still
allowed to have more than one tax free mobile phone if the others are
used primarily for work purposes with insignificant private use. That
would be the case if they are kept in the office overnight or in company
cars. It is probably wise to have a company policy about the use of such phones, signed by each relevant employee, so it can be shown
that additional phones are not available for private use and that
everyone is aware of the rules. We can give you a model agreement
for this.
