What is the best way to claim mobile phone expenses from your limited company?

Question, I am an IT contractor trading through a limited company and although I use my mobile phone for both business and personal calls, I don’t currently claim anything from my company because my monthly tariff is so low.

I don’t really want to move to a business plan as I have spoken to my mobile phone provider and they would not be able to keep me on the same price, but I do want to buy a new iPhone, is there anything I can claim back from my limited company?

 

We hope you enjoy this article from our archives. As tax rules change a lot over time, the information in this post may not be current, but we hope you still find it interesting.

 

Answer, June 2016:

HMRC  allow limited companies to provide a director / employee with one mobile phone which can be used in both a business and personal capacity without causing  benefit in kind tax issues.

However, in order to be able to claim the cost, the phone contract has to be in the name of the limited company, as opposed to a personal contract.

You cannot simply pay the monthly phone bill from the companies bank account, the contract itself needs to be between the limited company and the phone provider.

It is possible to speak to your mobile phone provider to ask them to officially transfer the contract to the company, however if you are going to do this you need to be careful that they don’t put you on a more expensive plan.

In this particular scenario the IT contractor has indicated that due to being on a low price monthly plan they do not wish to change their contract, therefore what they could instead choose to do is simply have their limited company purchase the new iPhone handset directly.

This would be allowable as a business expense, meaning 20% corporation tax would be saved on the cost of the handset.

The real tax savings are likely to be higher than this as if they were to buy it personally it would be from money that they would have extracted from their company, on which they are likely to have been charged personal tax (with the new dividend tax rules).

Depending on whether they are VAT registered and what VAT scheme they are on, they may also be able to claim the VAT back on the handset.

Please be aware that when it comes to claiming mobile phone expenses, the handset will be an asset of the company, so if it is sold any proceeds will be taxable income for corporation tax purposes (and if VAT registered, VAT will be charged on the sale).