When you run your own company, is there a tax-efficient way to claim for business phone and business broadband costs as business expenses. As part of running your business, can you also claim for a business mobile phone contract?
When we consider the above, two points for you to note are:
- 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 that you are planning to claim as a business expense would have been incurred on a personal level, regardless of any business use. In this case, if you claim for such expenses through your business, you will pay extra tax.
History gone by
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, and this was taxable on the employee through their PAYE tax code that in turn was applied to their salary.
no associated BIK. If you run your own company, your business can do this for you too. As a result, you can claim for the charges for your mobile phone or SIM card as business expenses and there is no BIK. Please note, it is advisable to try and make sure that your mobile phone contract is in your business name. It is also important to note that although you may use your mobile phone for business and personal calls, you should make sure that any token personal use’ is ‘reasonable.’ If you follow this advice, your mobile phone expenses are an allowable business expense.
Business phone and business broadband -what you can claim for?
As mentioned, if you are a business owner and you use your mobile for business reasons, you can claim for 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 go get your new mobile phone contract in your company’s name. As part of this, you will be able to choose the correct deal and monthly tariff to fit your predicted future needs for your business calls.
Business phone -dedicated landline
Can you claim for a dedicated business 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 need to be in the business name.
What’s more, if you work from home and have a dedicated business phone line, you may have your own home office. Two things to think about here are how to create your home office and what can you claim for the use of this.
A further thought is when you a business phone number, this will look more professional to your clients and contacts when shown on stationery such as business cards, letters, invoices etc.
Business only calls
Business call charges on your personal mobile or landline phone bill are a genuine business expense. Therefore, your company can claim for these costs and it can also reclaim the VAT element on the business calls. However, you cannot claim for any part of the line rental. This is because you will incur the cost if your personal mobile or landline phone if you use it for business or not.
Furthermore, it can now be difficult to split out the cost of business calls 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, this is because the business calls incur no extra cost on top of the tariff that you already pay for your personal calls.
You can claim for broadband if you have a dedicated business broadband connection, and the line is usable only for business purposes. The account and bills for the business broadband 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 for 50% of the broadband cost against your business.
If you have no actual broadband contract at home, and you need internet access to carry out your trade, then you can claim for any internet related costs here for your business.
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 and once you have done so, you can claim for 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 are unable to claim for line rental on the phone used for both business and personal use.
If there is `excessive’ personal use of your mobile phone charges or broadband charges or lots of personal use on your business line, you should not claim for these costs. If you proceed to claim, HMRC will treat these as taxable benefits, upon which 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 for the VAT on any business phone and broadband costs, providing that the contract(s) for this are in your company’s name.
Please note, it is best practice to claim for your business phone and business broadband costs. Most contractors and small business owners claim for their mobile phone costs as company expenses. Many will also claim expenses for the business element of their broadband charges.
Link to Contractor Advice UK group on