Tax relief on Mobile Phone - PAYE

Batsman81

Hi all,

I am just doing my self assessment (yawn!) and had a question. My employer paid my mobile phone bill, every month with my salary. The figure fluctuates depending on what I spend every month ofcourse.

I just noticed that I have been taxed on the TOTAL credits of my salary - including the re-reimbursed amount of the mobile phone expense - so surely I should be able to claim this back?

Also, I think I know the answer to this, but are you able to claim hotel and meals when travelling to client sites? I was a salesman, so travelling a few times a month was part of my job.

Any help would be very much appreciated.

Batsman81!

Batsman81

Just had a thought - I guess the employer paying my mobile phone bill is a benefit to me, and hence I am being taxed... is that right?

TheCyclingProgrammer

Your employer is entitled to provide its employees with one mobile phone for both private and business use tax free BUT the contract needs to be in your employers name.

If the contract is in your name, then you can only get tax relief for itemised business calls. Any payments your employer makes towards your phone bill are treated as a BIK and should appear on your P11D. You will be taxed on these payments but you should still be able to claim relief for your business calls.

You'll effectively pay income tax on the total annual bill payments less any business call costs. However you will still pay Class 1 NIC on the total amount as it is a BIK. There are othe rules if there are calls on the bill outside of your tariff - you will also pay tax and NIC on any additional private calls outside your tariff but not on any additional business calls.

Take a look here:
http://www.hmrc.gov.uk/payerti/exb/a-z/t/telephones-mobile.htm

The only exception is if the phone was both purchased for and only used for business purposes, in which case there should be no tax or NIC to pay but it may still need to be reported on your P11D.

To be honest, if you mostly use it for business it may be much more beneficial if your employer was to provide you with a business phone and a contract in your employers name. You'll still be able to use it for personal calls but you won't be taxed - it won't even appear on your P11D.

TheCyclingProgrammer

To answer your other question, yes business travel - including related accomodation, subsistence and trivial overnight expenses - are normally claimable, either against existing income or against any payments your employer makes to reimburse you for your out of pocket expenses (but these will need to appear on your P11D).

If you have to attend the office first then travel between work and the office will not be claimable but the onward journey to your client will.

http://www.hmrc.gov.uk/manuals/eimanual/EIM32366.htm

Just make sure you're not caught by the area rule.

http://www.hmrc.gov.uk/manuals/eimanual/EIM32368.htm

Batsman81

Thanks for that - very useful.

Just to clarify - the phone is in my name and the contract is under me. I actually use it mainly for personal calls, but do have a few business calls on there.

The employer just agreed to pay the whole bill, every month. Hence was confused on the tax implications.

With regards to the hotel and accommodation - I should have mentioned that through the normal expense process, they pay me back straight into my bank account (not through payslips). .

So I get the full amount back, but wanted to know if I can put it as an allowable expense on my self assessment. I was under the impression that you can do this if you're a contractor, but what about a full-time employee.

Batsman81

HappyMJ

The hotel and meal expenses are reimbursed tax free to you. You don't put them anywhere on a tax return. You should have given the receipts to the employer keeping a copy for yourself in case any questions come up about the credits to your bank account. You can't claim for them again against your income.

TheCyclingProgrammer

HappyMJ wrote: »

The hotel and meal expenses are reimbursed tax free to you. You don't put them anywhere on a tax return. You should have given the receipts to the employer keeping a copy for yourself in case any questions come up about the credits to your bank account. You can't claim for them again against your income.

This isn't necessarily correct. Expense payments are not automatically tax free unless they are exempt from tax. Mileage payments at prescribed rates, for example, are exempt, as are working from home payments up to £4/week. Other employee business expense payments like train fares, accomodation and subsistence are not exempt but an employee can claim relief against these payments.

Unless OPs employer has a dispensation, these payments should be reported on their P11D. The employee will then need to make a claim for tax relief on these payments on their self assessment if they do one or a P87 or they will end up being taxed, usually by a reduction in their tax code.

Employer is entitled to a copy of the receipts as evidence that the expenses are incurred however it is vital that the employee keeps their receipts as it is they who are applying for tax relief and they would need to produce them in the event of an enquiry.

If OPs employer does have a dispensation then they will not need to report the expenses on the P11D and the employee will not need to apply for relief or notify HMRC as they will not be taxed.

Source: I run my own company and have had to do this for my own expenses every year until the last, when I applied for and was granted a dispensation for travel expenses and business calls.

On your self assessment there are two boxes to fill in: expense payments received - enter the amounts on your P11D, and business expenses claimed, usually the same if you're employer has reimbursed you actual costs, cancelling the other figure out.

Be warned: despite putting in a claim for business expenses equivalent to the amounts on your P11D, it is common for HMRC to issue a tax code adjustment anyway, mainly due to the delay between P11D and SA filing. You will need to ring them if this happens. They did it every year to me which is why I finally applied for a dispensation!

TheCyclingProgrammer

By the way, there is an ongoing consultation into simplifying employee expenses for things like travel etc. such that expenses that are effectively treated as exempt when the net effect of the payment and relief claim means there is no tax to pay whilst removing the need for employers to obtain dispensations. This should make the whole process a lot easier and avoid the tax code adjustment problem too.

Batsman81

Thanks all for your help! Very useful