Introduction -claim phone and broadband costs
When you run your own company, is there a tax-efficient way to claim for phone and broadband costs as business expenses? As part of running your business, can you also claim our business mobile phone expenses? These are both questions that will arise for small business owners when they ask about claiming phone and internet on tax.
When we consider how to claim your small business phone and broadband expenses, there are two points for you to note:
- Any business expenses that you incur must be wholly and exclusively for your business.
- Is there a duality of purpose? By this we mean is the cost that you plan to claim as a business expense, a cost you will incur on a personal level regardless of any business use? If the answer is yes, you will pay extra tax if you claim for such costs through your business.
Therefore, let us investigate how to claim phone expenses and how to claim broadband costs. As part of this, we will look at what considerations there will be when making claims for business telephone and broadband charges.
Recent history and how to claim mobile phone as business expense
Can I claim my mobile phone as a business expense? In fact, can I buy a mobile phone through my business too? Twenty or so years ago, some employers would choose to provide their employees with a business mobile phone. Those that did also provided their employees with a Benefit in Kind (BIK). At that time, the BIK was £200. This was taxable on the employee through their PAYE tax code that was applied to their salary.
Today, when it comes to claiming phone bill on tax, a business can provide each staff member with one mobile phone for business use 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 business mobile phone expenses or SIM card tax-free, and there is no BIK.
Please note that as part of your small business mobile phone tax deduction, 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, you can claim phone expenses for your mobile usage and these are tax-deductible business costs.
Claim phone and broadband costs -when you do this, what can you claim?
Let us now investigate what you can claim for your small business phone and broadband costs.
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 business mobile phone 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 phone contract.
Business telephone -dedicated landline
If you have a business telephone line and broadband, 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 further things you can think about here are:
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 business calls from personal phone bills, you are unable to claim them 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.
Business Broadband expenses -can I claim internet as a business expense?
Claiming for broadband
When you are in business for yourself, you may ask can I claim broadband as a business expense? As part of a broadband service, 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 if you are going to use the internet for business use, 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, you may consider can I claim my internet bill as a business expense? It is important to remember that you can claim business broadband costs if you have a dedicated business broadband connection. Furthermore, as part of your business broadband at home, you should only use the phone line for business purposes. When you do this, you can search the market for a good broadband deal.
Get the bills in the company name
The account and bills for the business broadband service should be in the business name. As part of your business broadband costs, HMRC accepts that there may be a minor amount of personal usage here.
When you work at home, if your home office broadband is in your personal name, you may ask how much of my internet can I deduct for business? Notably, the general rule is you cannot claim this unless you can split out the business element or approximate business element. It would be fair to say, if you use your home office broadband significantly 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 and broadband
When you do your research, there are plenty of deals for a business phone line with broadband. Most contracts will last for two years or even three years. However, some deals for phone and broadband for small business 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 providers for business phone & broadband, some of the leading choices for business phones are BT, Virgin Media, Sky, PlusNet, TalkTalk, and XLN.
Claim phone and broadband costs -other considerations
When you look at business broadband and phone deals, there is plenty to consider.
Full fibre broadband
This type of broadband is fairly new on the scene and most of the top UK suppliers will have this available. It is a type of high-speed broadband and uses fibre optic cables for transferring data. This is faster than a normal broadband connection which uses standard copper cables.
When you purchase a phone package for your business, you can choose to add wi-fi for an additional cost per month. Please note that this will give you an online network. When you have this, 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 broadband for your business 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.
Claim phone and broadband costs for business -HMRC guidance
Please refer to the HMRC manuals below for HMRC’s technical advice on small business telephone and broadband. These relate to the tax treatment of business phone and internet costs including 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:
- The company will need to pay Class 1A National Insurance; and
- The employee will also need to pay tax on these.
VAT on phone bills and internet
If your business is VAT registered, it can claim the VAT on any business-related 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 phone and broadband costs that you use for business. If you work from home some of the time, or much of the time, and use your home office broadband for work reasons you can claim what you think is the fair business element.
Most contractors and small business owners claim their mobile phone costs as company expenses. In addition, many will also claim expenses for the business element of their broadband charges.
Link to Contractor Advice UK group on