If you are a Limited Company Director, you are considered to be both an employer and an employee of your Company. As the employee of your Limited Company you may provide yourself with benefits and business expenses, and some of these are taxable.
Non Taxable expenses are otherwise known as ‘Allowable expenses’ – and including these can help you reduce your tax bill.
A good accountant will ensure that these expenses are treated correctly to save you money on the profit you pay tax on when preparing your Corporation Tax return at the end of the year.
Allowable expenses are those incurred wholly and exclusively for the business, and not for your own personal use.
Mobile Phone Expenses
Today we will look at mobiles phones and whether they can be treated as a valid business expense as they are often used for both personal and business calls.
Purchase of a mobile phone
The mobile phone must be paid for out of the Business Bank account, and be owned by the Limited Company and not the Limited Company Director. This should be noted on the invoices received from the phone company (which you will need to keep).
Every day running of the mobile phone
‘Reasonable personal use’ or ‘token use’ can be included alongside the business use of the phone. As with most stipulations by HMRC, ‘reasonable’ needs to be seen as showing ‘due diligence’ (don’t take the Mickey basically).
Being reimbursed for business calls on your personal mobile
The cost of these calls can be legitimately claimed back as business expenses.
What about claiming back the VAT?
This depends on whether you are using this phone entirely for business purposes, or if you are splitting the bill between personal and business.
I.e. if you use your mobile 50% for business and 50% for personal, you can only claim back the VAT on the 50% of business calls.
No VAT can be claimed back on the mobile phone if you are operating on the Flat Rate Scheme.
What about Pay as You Go Phones?
Pay as You Go Top Ups for business can be claimed back as an allowable business expenses.
And Smart Phones – are they treated differently?
HMRC actually changed their treatment of Blackberries, iPhones and other Smart Phones in Feb 2012 (previously they were dealt with as taxable ‘Benefit’s in Kind’) and HMRC “now accepts that smart phones satisfy the conditions to qualify as mobile phones”. Also HMRC previously regarded smart phones as more than simply phone apparatus, i.e. you can also use them to email, etc…so luckily this has now changed. They are now therefore exempt from a tax charge if used for business, and can qualify as an allowable business expense.
We hope this has helped you understand mobile phone expenses a little better, but remember as a QAccounting client if you have queries on this, or any subject, please contact your dedicated Account Manager who will be happy to help.
We also have a great guide to expenses, where you can find even more useful information, not only about mobile phone expenses but much more!
And finally, remember to keep all receipts and invoices relating to your mobile phone.
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