Do you provide your employees with a mobile phone? Did you know that this could be a taxable benefit and therefore could cost your business more than you expect but if you provide it in the right way there are no tax or NI implications?
HMRC’s definition of a mobile phone is “a device that is designated or adapted for the primary purpose of making and receiving phone calls over a public telecommunications network, even if that device can be used for other purposes.”
- You can provide an employee with a mobile phone for business and personal use and, as long as the contract is with your company, there are no tax or NI implications.
- If you provide your employee with a second mobile phone it is classed as an asset and must be declared on a P11D; there are no tax or NI implications.
- If you pay the provider of your employee’s mobile phone and the contract is in the employee’s name the value of the payment you make must be put through the payroll and NICs paid by both the employee and the employer. The total amount paid over the year must also be declared on a P11D. However if the phone is acquired for business purposes only and is used only for business it only has to be reported on the P11D and not through the payroll as well.
- If you reimburse your employee for their mobile phone tariff the amount you reimburse must be added to their gross pay and will be subject to tax and national insurance contributions. If you reimburse the cost of calls in excess of the monthly tariff the value of personal calls must be added to gross pay, but the value of business calls must be declared on a P11D.
- If you “top up” an employee’s mobile phone for business calls only you must report this on a P11D. There is no tax or NI to pay unless you reimburse the employee for non-business calls.
Note: Other devices that have telephone functionality (for example, ipads, tablets, laptop computers and satellite navigation devices) use the internet to make and receive telephone calls and so do not meet the “primary purpose” test to be classified as a mobile phone.