PAYE tax and National Insurance Contributions are due if you reimburse the cost of the mobile telephone, service charges, the cost of private calls, or provide the employee with a voucher for use in relation to the mobile telephone or private calls made on it.
Where you only reimburse the costs incurred by an employee in making business calls only on his or her own mobile telephone, you can ask for a dispensation from HM Revenue and Customs. This will avoid the need to report the payments on the end of year form P11d for each employee. If you do not have a dispensation you must return the full cost on form P11D at section N.
No Class 1 or Class 1A NICs are payable on this expense payment, but the employee will have to pay income tax on this payment. However, as the calls were incurred for business they can claim tax relief against the payment, either on a Self Assessment tax return, or a form P87 if they are not required to complete a tax return.
An alternative option you have is to provide these employees with a mobile telephone and enter into a service agreement with the telephone company as there is no liability for NICs or tax. This applies to the provision of the telephone, the service and all calls made, including personal calls. However, you must ensure there is a restriction to one mobile provided per employee, as the exemption only applies to one mobile phone and does not extend to members of the employees’ family or household.
By Jo Nockels
Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.