Business owners often wonder: ‘is mobile phone allowance taxable?’ The answer: it depends. Here’s how to get tax free tech for your employees!
(2 minute read)
Is Mobile Phone Allowance Taxable?
Most employers want to provide their teams with the tools they need to get the job done well. For some, this means mobile phones.
Mobile phones are becoming increasingly prominent in the workplace. This leads tax-conscious employers to look for efficient ways of offering these devices to their workers.
The good news is that if you follow the rules, mobile phones can be 100% tax free!
When is a Mobile Phone not a Mobile Phone?
- When it’s a landline
The phone you provide mustn’t be a landline. Meaning it can’t be physically connected to a landline and that it can’t be used solely as a wireless extension of a landline.
- When its primary purpose isn’t to make and receive spoken messages
This means that tablets, laptops, MP3 players etc aren’t included. (Although you may be able to give these as tax free gifts)
It can sometimes to be difficult to determine what counts. For example, a simple tablet is considered a portable computer whilst a smartphone is a mobile phone. This is true even when the phone has more advanced functions.
Advertising often helps resolve some of the uncertainty. If it is advertised as a mobile phone, it will generally be acceptable.
Is a Mobile Phone a Benefit in Kind?
Once you know the phone’s a phone, consider the Benefit in Kind rules. This rule can easily trip up some employers.
If you give a phone to an employee or they’re named on the contract, it’s a Benefit in Kind and no longer tax free.
This is because ownership of the phone is a form of payment for the employee.
To avoid this, you should ensure you retain ownership of the phone. Contracts and bills should be in your name. If your employee also uses the phone privately, you can arrange for them to cover personal costs.
What Now?
A mobile phone can be a great perk to give to your employees and a fantastic morale boost. But you must follow the rules carefully.
And for even more tax efficiency, remember to claim Input VAT on payments to the phone company!
Call us on 01772 788200 if you need any further advice about offering employee perks or any other tax problem.
Kind regards Ilyas