Are you aware of the implications of providing a mobile phone to your employee or reimbursing them for their mobile phone costs? It could cost you, and them, more than you think.
- If your employee arranges the phone and you pay the supplier the cost must be put through the payroll and Class 1 NIC deducted. It must also be reported on form P11D.
- If your employee uses their own phone and you reimburse them for the monthly tariff then you must deduct tax and Class 1 NIC from the value of the reimbursement each month.
- If, in addition to reimbursing the monthly tariff, you pay for private call charges incurred in excess of the monthly tariff then you must deduct tax and Class 1 NIC from this reimbursed amount too.
- If you reimburse business call charges incurred in excess of the monthly tariff no deduction through the payroll for this amount is necessary although the value must be reported on form P11D.
- If your employee uses a "pay as you go" mobile for business calls and you reimburse them only for the cost of the business calls you do not have to make any deduction for PAYE and NIC but must report the reimbursed amount on form P11D. If you give them money for "top ups" instead you would report the total given to them on form P11D.
If you provide your employee with a mobile phone or a SIM card and the contract is between yourself and the supplier there is nothing to report on form P11D and no deductions are necessary for PAYE or NIC. However if you provide an employee with more than one phone then the above rules apply to the second phone.
The provision of a single mobile phone to a director or an employee for business and private use is exempt from any additional charges or reporting. This exemption covers the cost of the phone, line rental and cost of calls which are paid by the employer for that phone.
HMRC's definition of a "mobile phone" is "any apparatus which is capable of transmitting and receiving spoken messages and used in connection with a public electronic communications service. Examples of apparatus which does not fall within the definition of a mobile phone include satellite navigation devices, devices that are solely PDAs (Personal Digital Assistants) and tablet and laptop computers."
For more detailed information about providing your employee with a mobile phone and the exclusion of an employee's family from having a company mobile phone visit HMRC Provision of Mobile Phone to Director or Employee.
Note: P11D is the form you report any expenses and benefits you have paid to your employees during the tax year. Some expenses and benefits may be subject to Class 1A National Insurance contributions payable by the employer.