With the mainstream use of smartphones, mobile phone expenses are now an everyday expense for businesses. But how should they be treated in your tax return and accounts? This depends on whether you are trading as a Sole Trader or Limited Company.

Sole Trader

You can either have two phone contracts with one phone specifically for the business meaning you can put the business phone in as an allowable expense in your tax return or if you only want one phone then you need to split out the personal and business use. To work out the split have a look at your monthly total bill costs over the course of the period and if they are relatively consistent then have a look at a sample period of three months and work through the use in each bill and highlight either the business calls / use or the personal calls / use (whichever is likely to be smaller, as there will be less to highlight). Once you have done this you should be able to work out the correct amount to allocate to the business. Remember to factor in data charges, VAT, line rental etc. This is never going to be 100% correct but as long as you are sensible when doing the calculation and can show HMRC your workings if ever inspected you should be fine. For a guide of other typical expenses for the self employed see here.

Limited Company

HMRC brought out new rulings in 2012 which has allowed a limited company to provide it’s staff / officers with one smartphone each. The phone can be used for both business and personal use without there being a taxable benefit, however the contract must be in the companies name. It cannot be a personal mobile phone contract even if it is used entirely for business use, otherwise you will have a tax charge.  So where does that leave you if you already have a business phone but it is in your personal name? Well you can actually get in touch with your mobile phone provider and ask them to transfer the contract to your limited company (I am assuming you are the owner / director of the limited company, if you are just an employee of the company you will clearly need to discuss this with the directors). Just be careful when transferring the contract that you understand the charges as sometimes the providers will try and charge more for a business account. The alternative is to take out a new business contract. So having your mobile phone in your limited company is actually a very tax efficient benefit, if done correctly.

If you do not have the mobile phone contract in the companies name you can only claim highlighted specific call charges that have been incurred on your personal mobile phone contract for business use. However these days most contracts have inclusive minutes so there will be zero cost against these calls and you therefore cannot claim the expense. No claim can be made for line rental without there being a tax charge. You can see that it is definitely worth getting that contract in the companies name!


Leave a Reply