Mobile phone allowance advice

chrisbunch

Hi tax wizards,

I'm interested if anyone has any advice/input on a tax conundrum I'm facing.

I've just started working for a new firm, a small startup. Since they're small, they don't want the overhead of buying and managing mobile phone contracts for staff in contact with customers.
Instead, their preference would be to pay me a monthly cash allowance specifically for the provision of a business phone. I would maintain a separate phone for personal usage.

Using the allowance I would most likely get an iPhone/Android smart-phone device, which I think is treated differently from a tax perspective (an asset, and not a phone).

Any advice on the best way to proceed? If I accept the allowance, do I need to ensure it's declared by the firm on my P11D, i.e. I'd be taxed on it?

Any input welcomed for more sensible approaches based on your own experiences.

Thanks,

Chris

Regshoe

Your employer is allowed to provide you with a mobile phone as a tax free benefit. Normally this is regardless of whether you use this for just business use or business and personal use.

The problem that you have picked up on is that the newer Smart Phones may not fall under the exemption for mobile phones as they are getting closer to a personal computer - for which there would be a taxable benefit if you are using it for personal use. I'm not sure if there are any test cases for this yet though.

If you were just using it for business use there would be no taxable benefit (the same as using a business laptop only for business).

Unfortunately your company is pushing the admin onto you which slightly complicates things. The allowance that your company is paying you should be taxed (in the same way that a car allowance would be).

The good news is that you should be able to claim tax relief for the amount you spend on the phone contract - I'm assuming here that you are probably going to get a contract that includes the cost of the phone, rather than buy the phone then get a monthly service contract, or PAYG. The rules say it has to be for your job and only for your job, but it sounds like it is, the fact that you will have a personal phone as well helps a lot.

Form P11d doesn't come into it as you are not getting a taxable benefit - you will just be getting a cash allowance that as far as HMRC is concerned is just the same as your basic pay. You claim the tax relief via your self assessment, or Form P87 if you don't already fill out a SA.

http://www.hmrc.gov.uk/incometax/how-to-get.htm

chrisbunch

Regshoe wrote: »

Unfortunately your company is pushing the admin onto you which slightly complicates things. The allowance that your company is paying you should be taxed (in the same way that a car allowance would be).

The good news is that you should be able to claim tax relief for the amount you spend on the phone contract - I'm assuming here that you are probably going to get a contract that includes the cost of the phone, rather than buy the phone then get a monthly service contract, or PAYG. The rules say it has to be for your job and only for your job, but it sounds like it is, the fact that you will have a personal phone as well helps a lot.

Yes, I'll maintain my personal mobile separately since I wish to keep the number beyond the duration of this employment and don't want to mix business/personal calls.

You say the allowance should be taxed - so this means it should be processed through PAYE and have tax/NIC paid on it I assume?

In terms of what I might get, I'm really not sure yet. I was half thinking of a giffgaff SIM and a purchased phone, but haven't looked into what is cheapest yet since I wasn't sure how to proceed. I believe the allowance is around 15/month or similar which isn't going to get much perhaps, but I do want to be able to access mails and ideally use GPS for directions, etc.

Thanks for the P87 advice.

Regshoe

Yes I think it should be taxed as it is a general allowance, rather than a direct reimbursement of costs. If the allowance is only £15 a month and you are likely to spend a lot more than that, then the tax you will save by claiming allowable expenses will outweigh the tax and NI you pay on the £15.

If you are going to buy a phone and sim separately then the phone will fall under capital allowances rather than expenses, though at the price of the average phone you will be able to claim the full cost when you buy it anyway.

It looks like if there are capital allowances involved then it will probably have to be a SA form rather than a P87, as the P87 makes no reference to capital allowances, only "expenses".

chrisbunch

Nothing's ever simple is it, ;-)

Thanks for your input - I'll give this some thought.