Before you sign up to a new phone contract, consider using your business to pay for it.
You’ll get the corporation tax benefit of 19% and if you’re VAT registered, the VAT back!
- Any Directors
- Any employees
HMRC has confirmed that a limited company may buy (or enter into a rental contract for) one mobile phone/smartphone (e.g. iphone, blackberry or similar) for each of its employees. The device’s sole purpose should be to allow the Director/employee to perform their job (such as contacting Clients or suppliers).
It may also be used for private use but this should not be significant; its primary purpose is for business use.
Benefits to you:
If the criteria above is met, then:
- The cost of the device and the cost of the monthly contract is fully allowable against tax for the Limited Company (saving you 19% corporation tax)
- Any additional costs are also covered – eg a screen cover or a screen repair
- The VAT is recoverable on all costs
- There is no benefit in kind for the Director/employee
- The employer will no longer need to record smartphones on P11Ds, nor pay Class 1A NICs on the supposed benefits of the mobile phone
- The contract must be in the name of the Limited Company
- The initial purchase and/or monthly payments must come out of the Limited Company’s bank account