Company mobile phones and tax implications: What employers need to know
Providing mobile phones to staff has become standard practice. However, the tax position can quickly catch employers out. Therefore, understanding the rules helps you stay compliant and avoid unexpected liabilities.
The basic position
When employers supply mobile phones, two areas matter. Specifically, the device itself and any related costs both need careful thought. Furthermore, the rules differ when employers reimburse employees for personal mobile phone expenses. Consequently, getting the treatment right from the outset saves time later.
The HMRC exemption explained
Fortunately, HMRC provides a specific exemption in many cases. Indeed, this exemption applies in clear circumstances. To qualify, the employer must provide one mobile phone or SIM card per employee. Moreover, the contract must sit between the employer and the mobile phone provider. Where these conditions apply, the provision is generally exempt from Income Tax and National Insurance. Helpfully, this remains true even if the employee uses the phone personally.
What the exemption covers
Importantly, the exemption is broad in scope. Specifically, it covers:
- The handset
- Line rental
- Calls, texts and data paid for by the employer
Therefore, employers can offer real value to staff without triggering a tax charge.
When reporting becomes necessary
However, the exemption does not always apply. Where telephone expenses fall outside the exemption, reporting duties begin. Consequently, employers must report the costs to HMRC. Additionally, they may need to deduct and pay tax and National Insurance. Nevertheless, expenses forming part of a salary sacrifice arrangement do not require reporting.
Example: When the employee holds the contract
The picture changes when the contract sits with the employee. For instance, the employee may arrange the phone while the employer pays the supplier. In this case, the company mobile phones and tax implications shift significantly. Therefore, the employer must:
- Report the cost on form P11D
- Pay Class 1 National Insurance through payroll
Staying compliant
Ultimately, the company mobile phones and tax implications depend on the precise arrangement. Therefore, reviewing your contracts and policies regularly is wise. Above all, clear procedures protect both the business and its workforce.
Get in touch
Unsure how the rules apply to your business? Get in touch with our team today. Together, we will help you structure mobile phone arrangements that remain fully compliant with HMRC.
