Overview

A company may provide one mobile phone to each employee, regardless of any actual business use, without triggering a benefit-in-kind charge. There are no personal tax or national insurance implications for an employee, and it is an allowable expense for the company against corporation tax.

However, there are several conditions. 

a) The invoice must not be in the employee's name, and employees cannot switch their direct debit to the company if they have a personal contract

b) Only one phone is permitted to be tax-free per employee

c) The arrangement must not be part of a salary sacrifice scheme

Extra phones are taxable as a benefit-in-kind and reported on a P11d of the employee. Phones provided to family members, who are not company employees, are deemed extra phones held by the employee. However, the business would still be able to claim the cost of the additional phones as an expense against corporation tax.

If the company settles a liability for a phone contract in the employee's name, then a benefit in kind would arise and would need to be reported on form P11d. So it is essential to register the contract and pay for it using the company name and bank account.

Contract mobile phones

We recommend you set up a phone contract and buy a phone in the company name, paying for the purchase through the company business account or with the company credit card. You can claim for the handset, monthly tariff and any calls over and above your tariff. Purchasing through the business provides clarity that the company bought and is running the phone. 

Pay-as-you-go phones

If you purchase a pay-as-you-go phone in the company name, you can claim the cost of the handset as an expense. We recommend that you avoid using your bank account or credit card to purchase a mobile phone intended for business.

Regarding pay-as-you-go top-ups, we recommend you log all calls relevant to business, as you should only claim for calls made for business purposes. If asked, you would need to be able to produce records to prove that the calls for which you are claiming were business related. For this reason, it is better to go down the contract route.

Personal mobile phones

If the phone is not in the company name, then the company cannot claim for the purchase of the handset or the costs of the tariff. If there is business expenditure outside the monthly tariff, it will only be possible to claim this part of the bill. However, many personal contracts today already include unlimited minutes and texts. HMRC believes an employee can incur no additional expense in making those business calls in these circumstances.