Self Employed Mobile Phone Expenses

faithlehane

Hi all.

I'm recently self employed, and want all my business calls to go through a different mobile phone to my personal one. There are several reasons, but one is that I assume this will make it easier to track the expenses incurred by the "business".

Since all it will be for is calls, I was just going to pick up a cheap Pay and Go phone, however how does one prove the expense of the top ups as there is no invoice?

I have had a search around and not found much information. What I would like to know is if I would be better off getting a contract phone? If I did have a contract phone that was exclusively for the business, I assume the whole monthly cost would be deductible?

Side note: My personal phone is also Pay and Go, so harder to separate the expense there.

Thanks

billymadbiker

You would top up a p&g phone using a credit/debit card from your business account and just put the payments down as expenses. the card/bank statments would be your 'proof' .
If hmrc ever need to check this they would have access to the phone companys records to prove what phone number the payment was topping up.

If you have a contract phone and only use it for business (100%) then the cost of the phone, the contract and all the calls can be claimed as expenses.

Be aware that not all phone providers will give you itemised bills though (or they may charge you extra for it) and you may need those if you ever have to prove it's 100% business use.

HappyMJ

Be careful with top ups. The top ups themselves are not valid business expenses. The calls are expenses only when you make the call....you would put it down in your accounts as a 10 minute call to X costing 60p....or whatever your pay as you go rate is. Free calls are not valid tax deductions....well they are but they are free so no expense has been incurred.

You need evidence in the form of screen shots or just a simple diary will suffice.

billymadbiker

If you are a one-man-band I think hmrc will be happy with the total cost of calls over the year rather than each one.

Ie, start of the year you have 0 credit, top up 10 times at £10 over the year and have £5 credit remaining at the end of the year then you can claim for £95

Pennywise

billymadbiker wrote: »

If you are a one-man-band I think hmrc will be happy with the total cost of calls over the year rather than each one.

Ie, start of the year you have 0 credit, top up 10 times at £10 over the year and have £5 credit remaining at the end of the year then you can claim for £95

But there's no proof that all the calls were for business is there? It's just proof that the money was spent which isn't adequate evidence for tax purposes.

We're starting to see HMRC not only disallow expenses where there's no "proof" but also trying to charge penalties for inadequate record keeping. I'd advise the OP getting a contract phone that comes with a monthly itemised invoice so that there is proof of who the calls were made to, and therefore that they were all business related.

billymadbiker

I don't know if you can get itemised charges for a PAYG phone?
I am on contract but even then I don't get itemised bills as the phone co charges £4.50/pm for them.

I have one mobile and 1 land line. As my business is 'out & about' I claim all the mobile against my tax and pay all the home phone as 'personal'.

When questioned by hmrc I told them I only ever TAKE personal calls on my mobile (no cost) and make all my personal calls, after work, from my landline.
They were more than happy with that. I also get 'free' home broadband as a extra to my mobile phone contract and rather than try and charge me for it, they actually told me, as I use the internet for work, that I could claim a % of my home phone line rental if I wanted (as I need to pay line rental to have the broadband).

But, my mobile phone bill is only about £40/pm.
So, at most, I am claiming about £200 back. If I got investigated and could not prove that ANY of my calls were business then I am only going to have to pay back £200 or so.

If you are running a telesales or something and your bills are £5k/pm then you may want to try a bit harder to make sure you have the proof you need to back up your claim!!

happycamel_2

The extra cost of the itemised bill is tax deductible. I wholly agree with Pennywise's post. The top ups are not tax deductible, business related calls are.

Pennywise

billymadbiker wrote: »

If I got investigated and could not prove that ANY of my calls were business then I am only going to have to pay back £200 or so.

No, it's not just the £200. HMRC are now strongly threatening penalties on top of the tax loss. They are threatening £500 for failing to keep adequate records and you can also face a penalty of a percentage of the tax loss, up to 100% for concealed and deliberate, more likely the 35% mark. So your £200 could rapidly rise to a cost to you nearer £1,000.

Of course, it's early days of the new regime, but this is certainly what HMRC are threatening. We've already seen them try to get 100% penalty for simple mistakes on a tax return, particularly in not ticking the "student loan" box - heard about that a few times now from other accountants! Also, they're hot on mileage and private use proportions, again, plenty of instances on the forums these days about their heavy handedness, especially re business records checks. On example is on the accounting web site as follows:-

http://www.accountingweb.co.uk/anyanswers/question/keeping-business-records

Advice has to be to really beef up your record keeping so that you could prove your expenses are business, not just prove that you paid them, which means mileage/phone logs, keeping backup documentation, such as emails, diaries, etc.

faithlehane

Thank you all very much for your replies.

I'm a web designer, been registered as self employed since June, but didn't finish my full time job until the end of August. I am only intending to freelance until January and get another full time job. That was one of the reasons I was reluctant to get a contract phone as the contracts tend to be 12 months +.

I receive more calls than I make (hence wanting a separate phone so I can silence it in the evenings without missing personal stuff) but as work is increasing I am having to make more outgoing calls.

I had originally intended to look for another job in October, and so was just using freelance to top up the savings I was living on. I then decided to use freelance and put off getting another job for a while. So at the moment I don't have a separate business account, judging by the onus on record keeping you have all mentioned I think I had better get one of those sorted. Just seems quite expensive for something that isn't vast quantities of money, and is probably only going to be for a couple of months.