Phone and Broadband Tax Deductions - Brookson Ltd

Phone and Broadband Tax Deductions

Depending on your personal circumstances, you may wish to consider phone and broadband reimbursement options.

Different liabilities exist for NICs, tax and PAYE depending on how you contract and use the phone and internet in your limited company. In this section we evaluate your individual circumstances and the implications for your tax position.

Home Phone (Landline)

  1. If the phone contract is in your name and your limited company pays the bill (including rental and calls) you will face a liability for Class 1 NICs and tax. This applies whether your limited company settles the bill directly with your provider or reimburses your costs.

     

  2. Where the telephone is available for business and private use, the full cost of the line rental must be treated as earnings because you benefit from the full cost of the rental as you have access to the phone for private calls. If your limited company reimburses you for business use, only the cost of the business calls can be claimed.

     

    Money reimbursed for personal calls or line rental is subject to Class 1 NICs. For tax purposes this is included in your salary in order to collect NIC and declared on your P11D form as a reimbursable expense. You could pay additional income tax on this amount based on the amounts reported on your P11D. No Class 1A is payable by the company on this amount as Class 1 NIC has been collected via your salary.

     

    Reimbursements for business calls only are an allowable business expense.

     

    These amounts are reportable on your P11D as a reimbursable expense. There is no taxable benefit in kind as the cost is actually a company expense.

     

    A separate section 336 Claim is made by the director, to offset the company expenses incurred in the performance of their duties as a director.

     

    The net effect is to reduce the disclosed Benefit in Kind on the P11D to nil.

     

    Where the whole bill is paid directly to the provider by the limited company, the full amount should be shown on a P11D form. This amount is not included in your salary. This is because the company has settled a company liability and not a personal liability of the director. There will, however, be a Benefit in Kind assessable on the director for the personal element of the phone bills and you will pay income tax based on the amount reported on your P11d.

     

    The company will also pay Class 1A NICs.

     

  3. Where the contract for the phone is in your limited company name and is used solely for business, a second line should be available for personal use. In this instance, there will be no liability for Class 1 NICs. Any amounts paid or reimbursed must be reported on a P11D form.

Mobile Phone

  1. If your limited company enters into a service agreement with a mobile phone company and provides you as the director with a mobile telephone, there is no liability for NICs or tax for the director and the cost is not declared on a P11D.

     

    The provision of one mobile phone by the limited company is tax-free. There is no tax charge on top-up vouchers where the mobile is owned by the limited company and is tax-free.
  2. If you use your own mobile telephone to make business calls, Class 1 NICs and tax are payable if the limited company reimburses the cost of the mobile phone, service charges or the cost of private calls. This also applies if you, as the director, are provided with a voucher for use in relation to the mobile phone or private calls made on it.

     

    Reimbursements for mobile business calls only are an allowable business expense.

     

    These amounts are reportable on your P11d as a reimbursable expense to you. There is no taxable benefit in kind as the cost is actually a company expense.

     

    A separate section 336 Claim is made by the director to offset the company expenses incurred in the performance of their duties as a director.

     

    The effect is to reduce the disclosed benefit in kind on the P11d to nil.

     

    Contractual arrangements vary so you need to check the particular tariff arrangements for the director’s mobile telephone. Business calls may not involve the director with any expense if the tariff includes free time. Where business calls cannot be accurately specified, under these circumstances any reimbursement will not be strictly for the cost of business calls.

     

    For tax purposes this is included in your salary in order to collect NIC and declared on your P11D form as a reimbursable expense.

     

    You could pay additional income tax on this amount based on the amounts reported on your P11d. No Class 1A is payable by the company on this amount as Class 1 NIC has been collected via your salary.

Other Phones

There may be other circumstances in which the limited company makes a payment to a director to meet the cost of telephone calls. Examples include:

  • Business calls made from a payphone.
  • Business or private calls made from a hotel while on a business trip.
  • Business calls made from home where another member of the household is the subscriber.

Payments that do not exceed the actual cost incurred for business calls are taxable. They should be reported on form P11D but, as the director, you will be entitled to a deduction as a business expense? and there is no liability to pay NICs

Where payments are greater than the actual cost, private calls or rental charges are taxable. They are subject to PAYE or should be reported on form P11D, but you may be entitled to a deduction for the actual cost of business calls and? are generally liable for Class 1 NICs.

There is no exemption from tax and NI contributions where payments are made to cover private telephone calls made by a director while on a business trip that requires an overnight stay. The exemption only applies where all incidental expenses met or reimbursed by the limited company do not exceed £5 per night (or £10 outside the UK).

Broadband

When a limited company provides Internet access at the director’s home solely for work purposes, and there is no separate billing for work and private calls, HMRC accepts that, where private use is not significant (and private use does not affect the cost of the package), the costs of connection is exempt from tax.

Where you are the subscriber for Internet access to your home and the limited company reimburses you for these costs, the amount is chargeable to Class 1 NICs and should be declared on the P11D form. If you are unable to separate business from private use however, costs cannot be claimed.

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