The phone as a business expense seems obvious. After all, communicating with customers, suppliers, potential customers or arranging matters over the phone in the office is the everyday life of every company.
However, when it comes to tax deduction of telephone costs, the matter is more complex.
Self Employed
The cost of deducting the phone in the case of self employed is quite simply.
1. Having two mobiles, we designate one that we use for business purposes and the cost of this telephone is "included" in the company's costs.
2. Having one telephone, we have to calculate the percentage of how much we use it for business and private purposes.
SAMPLE
The monthly phone bill is £30, of which 60% is used for business purposes and the remaining 40% for calls and SMS with family and loved ones.
Only £18 (60% of £ 30) will qualify for the company's expenses.
Limited Companies
No additional cost
If we have an Ltd company and we want to fully include the cost of the phone in the business costs and not incur any additional fees (PAYE and NIC), we have several options:
1. We must meet the following two conditions:
- An employee (including the director) has only 1 phone call from the Company
- The telephone contract is between the service provider and the company Ltd
2. We pay the bill and the company returns only what is used for business purposes above the monthly tariff
SAMPLE
Monthly bill £15, of which:
- £10 is a monthly fixed rate
- £3 is the cost of business calls
- £2 is the cost of private calls
The company can only refund us £3 without incurring any additional fees.
3. We have a "pay as you go" telephone and the employer (ltd company) reimburses us for the cost of business calls.
With additional cost
Other options are subject to additional fees (PAYE and NIC):
1. The Ltd company pay directly for the mobile phone bill - then we have to pay NIC
2. We pay the bill and the company returns the money - in this case it is treated as income and we will additionally pay tax and NIC.