When you run your own company, is there a tax-efficient way to claim business phone and business broadband costs as business expenses? As part of running your business, can you also claim a business mobile phone contract?
When we consider claiming for your broadband and phone, there are two points for you to note:
- Any business expenses that you incur must be wholly and exclusively for your business, and;
- Where there is a duality of purpose, i.e., the cost you are planning to claim as a business expense would have been incurred on a personal level, regardless of any business use. You will pay extra tax if you claim for such costs through your business.
History gone by and how to claim your mobile phone on tax
Around twenty years ago, employers who chose to provide their employees with a business mobile phone also provided them with a Benefit in Kind (BIK). The BIK was £200, which was taxable on the employee through their PAYE tax code that was applied to their salary.
Today, a business can provide each staff member with one mobile phone to use for business with no associated BIK. If you run your own company, your business can do this for you too. As a result, you can claim the charges for your mobile phone or SIM card tax-free as business expenses, and there is no BIK. Please note that it is advisable to ensure that your mobile phone contract is in the name of your limited company. It is also important to note that although you may use your mobile phone for business and personal calls, you should ensure that any token personal use’ is ‘reasonable.’ Following this advice, your mobile phone expenses are tax-deductible business costs.
Business phone and business broadband -what can you claim?
Mobile phone expenses
As mentioned, if you are a business owner and use your mobile for business reasons, you can claim your mobile phone costs if the personal element is only minor. If you are starting your own business for the first time or have even been trading for a while and your mobile phone contract is up for renewal, you may decide to get your new mobile phone contract in the name of your limited company.
As part of deciding on a mobile business deal, you should aim to choose the best package. Please note that this will be in terms of the monthly tariff to fit your predicted future needs for your business calls. Moreover, as most mobile phone contracts are for 24 months, you will need to consider this when you take out a new business mobile contract.
Business phone -dedicated landline
Can you claim a dedicated phone line for your business? The answer to this question is yes, on the basis that you will use the line for business calls only. The dedicated business line contract and bills must be in the business name.
What’s more, if you work from home and have a dedicated phone line for business purposes, you may have your own home office. Two things to think about here are how to create your home office and what you can claim for the use of this.
A further thought is when you have a business phone number, it will look more professional. This is in terms of how it will look to your clients and contacts. Indeed, when shown on stationery such as business cards, letters, invoices, etc., it will remind them of your business.
Business only calls
Business call charges on your personal mobile or landline phone bill are a genuine business expense. Therefore, your company can claim these costs and reclaim the VAT on business calls. However, you cannot claim for any part of the line rental. Please note that this is because you will incur the cost of your personal mobile or landline phone whether you use it for business or not.
Furthermore, splitting out the cost of business calls can now be difficult, and this is due to the way that phone companies now package phone costs with free minutes, etc. Therefore, if you are not able to separate the business calls from the personal phone bills, you are unable to claim due to the duality of purpose rules. To explain further, business calls incur no extra cost because of the tariff you already pay for your personal calls.
When you are in business for yourself, you will need an internet connection to access e-mail and work-related websites. Therefore, when you choose a business broadband service, you will need to look for the best deals available. There will be several factors to consider, and notably, this will include the download speed. Therefore, it will be good to do your research before you choose a broadband package.
When you are a business owner, it is important to remember that you can claim broadband if you have a dedicated business broadband connection. Furthermore, you should only use the business phone line for business purposes. When you do this, you can search the market for a good broadband deal.
The account and bills for the business broadband service should be in the business name. HMRC accept that there may be a minor amount of personal usage here.
If your broadband is in your personal name, generally, you cannot claim this. That is unless you can split out the business element or approximate business element. It would be fair to say, if you use your broadband at home a lot for work reasons, and you estimate this to be 50% of your overall usage, then you can claim 50% of the broadband cost against your business.
If you have no actual broadband contract at home and need internet access to carry out your trade, then you can claim any internet-related costs here for your business.
Choosing a provider for a business phone line/broadband
When you do your research, there are plenty of deals to consider. Most contracts will last for two years or even three years. However, some deals will be better than others. When comparing the current deals, you will need to look at the cost, speed, download limits, and other factors.
Regarding a provider, some of the leading choices for business phones are BT, Virgin Media, Sky, PlusNet, TalkTalk, and XLN.
When you purchase a business phone package, you can choose to add wi-fi for an additional cost per month. Please note that this will give you an online network so that you can connect your business devices to the internet.
Static IP address
An IP address is a unique digital reference for a specific point on the internet.
What would be the benefit when you get a static IP address? Please note that this is a fixed Internet address rather than one that is dynamically assigned to you each time you connect. When it is static, it always stays the same, making it possible for users and other businesses to find you on the internet. You would need a static IP address if you were hosting your website or running an e-commerce business. Most UK companies charge a small additional fee for a static IP address.
When you have a business phone at home, you may wish to check the download and upload speeds. You can do tests online. Generally, a good download speed is at least 100 Mbps, while a good upload speed is at least 10 Mbps. You may need further research in this area if you have customers connected to your services and are streaming data to them.
If you are a sole trader, the rules above on business-only calls apply. Therefore, you will need to try and identify any business calls on your mobile and home phones. Once you have done so, you can claim these against tax.
Business phone and business broadband -HMRC guidance
Please refer to the HMRC manuals below for HMRC’s technical advice. These relate to the tax treatment of telephone-type expenses.
- EIM32940 –Telephone charges. This manual explains why you cannot claim line rental on the phone used for both business and personal use.
If there is `excessive’ personal use of your mobile phone charges, broadband charges, or lots of personal use on your business line, you should not claim these costs. If you proceed to claim, HMRC will treat these as taxable benefits:
a) The company will need to pay Class 1A National Insurance; and
b) The employee will also need to pay tax on these.
If your business is VAT registered, it can claim the VAT on any business phone and broadband costs. Note, this is on the basis that the contract(s) for this is in the name of your limited company.
Please note that it is best practice to claim your business phone and broadband costs. Most contractors and small business owners claim their mobile phone costs as company expenses, and many will also claim expenses for the business element of their broadband charges.
Link to Contractor Advice UK group on