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Mobile phones...A Tax Free benefit!

By stuart ramsay on Nov 12, 2021

As more and more people are working away from the office, providing employees with mobile phones can be a wonderful, tax-free, benefit that you can offer.

However, there are a number of pitfalls that you need to avoid.  Here's how to do it right!

What Phone Can I provide?

HMRC's definition of a mobile phone can include smartphones, so you're OK to provide the employee with the latest iPhone or Samsung smartphone.  

Who can I provide a phone to?

You can provide a phone to anyone who is an employee

You must only provide one phone to each employee

How must the contract be structured?

The contract must be between the employer and the phone contract provider to qualify for the tax breaks

The employee must reimburse the employer for any personal calls and SMS messages.  Of course, in these days of all-inclusive line rental contracts, it's unlikely that there will be any personal call charges, and, as such, there's no reimbursement needed

How much could I save doing this?

Total savings depend on the price of the contract.  A £50 a month contract costs £600 a year.  The tax saving would be 19% of that, so £114 of taxed saved.  Then there's also the VAT reclaims!

Can't I just reimburse my employee's contract costs?

Nope! Whilst the net effect is pretty much the same, HMRC is really clear that this is a taxable situation and tax will be due:

  • If the employer pays the bill on the employee's behalf, it's reportable through the P11D 
  • If the employer reimburses the employee then it's taxable via payroll

Of course, the employer can reimburse the employee for business calls, but as we've said above, most contracts today are "all-inclusive" so it's doubtful that there would be any additional call costs incurred



stuart ramsay

Written by stuart ramsay