A common expense for employeres is to provide their staff with a mobile phone. This is especially common for those who run their own business to keep using the same mobile phone but change the contract into the name of the company.
The advantages are simple – save corporation tax and save you paying this out of your own hard-earned cash. The provision of one mobile phone to each employee is a tax-exempt benefit. Howerver, if not done properyl, it can backfire.
The most efficient way of doing this is for the contract to be billed to the company and for the payment to come directly out of the company bank account. If it’s not done this way, then it will have the following tax implications:
The contract is billed to the employee, but the employer pays the supplier
- The cost must be reported on a form P11D and income tax paid by the employee, either via self-assessment or an adjustment to their tax code.
- Both the employee and the employer are liable to national insurance on the amount paid by the employer – this is paid the payroll and RTI submissions.
If the employee uses their own phone and the employer reimburses them
- Income tax, employee’s national insurance, and employers’ national insurance are all payable via the payroll and RTI submissions.
- As tax is paid via the payroll, no P11D is required.
It’s a simple one but very commonly missed – don’t get caught out by a nasty tax bill and potential penalties!