One of the most common questions we get from limited company directors is:
“Can my company pay for my mobile phone?”
The answer is often yes, but as with most things in tax, the detail matters.
The good news is that when it’s set up correctly, a company mobile phone can be provided without creating a P11D, additional tax for the director or a National Insurance charge for the company.
Let’s look at how it works.
The Simple Rule
The easiest way to remember it is this:
The contract should be in the company name and the company should pay the bill directly.
If those conditions are met, the phone will usually qualify for a tax exemption.
This means:
- No P11D
- No additional personal tax
- No Class 1A National Insurance
- No additional reporting to HMRC
Even if there is some personal use of the phone, the exemption can still apply.
For most directors, this is the cleanest and simplest way to operate.
A Typical Example
Let’s say:
- Caroline Boardman Consulting Limited takes out a mobile phone contract.
- The contract is in the company name.
- The company pays the monthly bill.
- The director uses the phone for both business and occasional personal calls.
There would be no taxable benefit. No P11D would be required and there would be no additional tax to pay personally.
Where Problems Start
The position becomes more complicated if the contract is in the director’s personal name.
For example:
- You take out a mobile phone contract personally.
- The monthly payments come from your personal bank account.
- The company reimburses you each month.
Many directors assume this is the same thing.
Unfortunately, it isn’t.
When a company reimburses a personal expense, the tax treatment can be very different. Depending on the circumstances, the reimbursement could potentially be treated as taxable income or require additional reporting.
There isn’t a one-size-fits-all answer, which is why we always recommend checking before setting it up.
What About Existing Personal Contracts?
This is where we see mistakes most often.
A director has had the same mobile phone contract for years and then starts trading through a limited company.
The obvious thought is:
“I’ll just put the bill through the company.”
Unfortunately, that’s where complications can arise because the contract still belongs to the individual rather than the company.
If you’re moving from sole trader to limited company, it’s worth considering whether the contract can be moved into the company name when it renews.
Can the Company Pay for More Than One Phone?
Potentially.
HMRC’s exemption generally applies to one mobile phone per employee or director.
The moment multiple phones are being provided, the tax position can become more complex and advice should be obtained before assuming the exemption applies.
What About Broadband?
A lot of directors assume broadband is treated in exactly the same way as a mobile phone.
It isn’t.
The tax treatment of broadband depends on factors such as:
- Who owns the contract.
- Whether there was already an existing personal contract.
- Whether additional costs are incurred for business purposes.
- Whether the arrangement is wholly and exclusively for business.
Because of this, it’s dangerous to assume that if your mobile phone is tax-free, your broadband automatically will be too.
What If I’m a Sole Trader?
The rules are different.
A sole trader and the business are legally the same person, so we’re generally looking at claiming the business proportion of the costs through the accounts rather than considering whether there’s a taxable benefit.
This is one of the many areas where operating as a sole trader and operating through a limited company produce different tax outcomes.
The CBC Advice
If you’re a limited company director and want the simplest tax position possible:
- Put the contract in the company name.
- Pay the bill directly from the company bank account.
- Keep records of the arrangement.
- Ask your accountant if you’re unsure.
Most mobile phone issues arise because the contract was already in a director’s personal name before the company became involved.
As with so many areas of tax, a quick question before making a change can save a lot of time, hassle and unexpected tax bills later.
Not sure whether your current arrangement is compliant? Ask your accountant, if that’s me… get in touch and we’ll be happy to help, as always.
