If a mobile phone used by an employee is held in the company name then the line rental and calls are allowable company expenses.
If the mobile phone is held in an employee’s name though only business calls may be claimed, no line rental and not the cost of the handset itself.
What is allowed
Mobile phones are a vital part of business and are therefore reasonable business expenses that you can put through your Limited Company to reduce your Corporation Tax. However, HMRC does have some pretty strict criteria:
- Each employee has only one business mobile
- The phone handset must be owned by the Company
- The phone contract must be in the name of the Company and not the employee
So it’s vital that it is the Company that takes out the mobile phone contract and not the employee. You cannot continue to use your personal mobile phone and recharge all expenses to your company that means the calls themselves, the cost of the handset and the monthly fees.
What can you do about phones in an employee’s name?
There are two options:
- Speak to the network operator and have them transfer the contract to the Company
- Charge the cost of calls only to the business
The first option is the most effective but you may find an increase in monthly fees, as long as this is less than 20% you are still going to save money though.
The second option requires you to obtain an itemised statement each month, highlight the business calls only and then submit this as an expense claim to obtain the tax deduction.