The answer to this question is yes – with certain conditions. Mobile phone costs can be significant so it is worth claiming them if you can. How you claim them depends on whether you are a sole trader/partner or working through a company.
Sole traders and partnerships
For sole traders and partnerships, the allowable expense is based on usage of the phone for business compared to personal. HMRC will accept a percentage basis that is reasonable. Alternatively, if you own two mobile phones, one of which is used exclusively for business, you can claim the full cost of this phone.
Limited companies
Contracts in company name
For limited companies it is the phone contract that is important.
Any type of contract undertaken for a phone must be in the company name if you want to claim this as a company expense. If it is then HMRC will allow the full cost of the handset, monthly ongoing expenses and associated costs such as provision of a hands-free kit. No deduction is required for personal use.
This applies to SIM only contracts too. The contract must be in the company name if you want to claim the monthly costs.
One phone can be provided to each director or employee. If more than one phone is provided or are given to family members who are not directors or employees of the company, these will be treated as benefits in kind. The company can claim the cost of the additional phone as an expense against corporation tax but, overall, this would not generally be tax efficient.
What if the phone contract is in your name?
If this is the case, then you can only claim for business calls incurred above the standard monthly tariff.
When using your own phone, you need to keep records to support the claims for business calls. Such costs also need to be reported on a P11D at the end of the tax year (this is a reporting requirement only; no benefit in kind arises).
If you claim for any other monthly costs associated with a phone in your own name, they will either be treated as a benefit in kind (if the company pays directly for the costs) or as ‘salary’ paid to you with tax and NI due (if you pay the costs and the company reimburses you). For this reason, it is better not to put these costs through your company.
What about a pay as you go phone with no contract?
If you already have a phone, which you are using for both personal and business purposes, the company can pay for the cost of top ups or vouchers required to make business calls. However, the company must pay for these directly rather than reimbursing you for the expense paid from personal funds. If the phone is not a company asset, then the cost of the top ups must be reported on a P11D at the end of the tax year – this is a reporting requirement only.
Purchasing a new phone?
Ideally both the invoice and the contract for the new phone should be in the company name. In this case, the company can pay for the purchase of the handset and the ongoing costs.
Handset purchased with no contract
The company can reimburse you for the cost of a handset bought outright using personal funds. Similarly, if you already own a handset, with no contract, you can sell the phone to the company at its current market value. For example, you may have bought a phone before the company was formed, and by selling it to the company it becomes a company asset. If you subsequently engage in a contract for data, this contract will need to be in the company name to claim the ongoing costs.
Company dormant?
If your company becomes dormant you can still claim the monthly mobile costs provided the contract is in the company name, and no more than one is available to each director/employee.
We hope this has helped. Should you need any further information please contact your accountant.