It’s essential to understand the correct tax treatment of expenses when an employer provides mobile phones to their employees, including reimbursement of employee’s phone costs.
As a general rule, providing one mobile phone or SIM card to a director or employee for private use is exempt from tax and National Insurance reporting requirements. This exemption covers the phone itself, any line rental, and the cost of private calls paid for by the employer on that phone. However, the phone contract must be between the employer and the supplier.
If the telephone expenses are not exempt, then they must be reported to HMRC, and employers may have to deduct and pay tax and National Insurance. However, employee’s mobile phone expenses do not have to be reported if they are part of a salary sacrifice arrangement.
For instance, if an employee arranges the phone but the employer pays the supplier, then the employer must report the cost on form P11D and pay Class 1 National Insurance through payroll.
It’s important to note that there are devices with telephone functionality that do not qualify as mobile phones. The tax exemption only applies to devices primarily designed for voice communication. For example, the rules do not apply to tablets, PDAs, and other similar devices, as clarified by HMRC.
CB Reid have a specialist tax team who can help with your personal and company tax requirements.