Tax rules on company mobile phones clarified

HMRC has issued guidance on the tax rules for company mobile phones for employers

The guidance states that there is no tax charge unless the mobile phone can be converted into money by the employee, and this is limited to one mobile phone given to an employee as well as any line rental or the cost of any private calls for that phone paid for by the employer.

One mobile phone may consist of two connections (for example, two SIM cards) to the same number, one in a handset and another in a hands-free phone in a car.

However, two connections to two different numbers represents two mobile phones.

A mobile phone given to a member of an employee’s family or household is taxable in all circumstances, unless the family or household member is given the phone as an employee in their own right.

In addition, money an employer pays to an employee to use their own mobile phone is taxable.

If an employer gives a mobile phone to an employee solely for business use, and private use is not significant, there is no charge to tax.

HMRC confirmed that ‘consequently, it’s possible for an employer to give two, or more, mobile phones to an employee, without creating a tax charge, if one (or more) is given solely for business use (and private use is not significant) and only one is given for private use. But if two mobile phones are given for private use, or for mixed private and business use, only one is exempt’.

The employee and the employer need to decide which is exempt and which is chargeable as a benefit.

Although smartphones are explicitly covered by the rules, the primary purpose test still does not cover devices that are used for VOIP [voice over internet protocol] phone calls, for example via an app on a mobile or laptop.

HMRC guidance stated that ‘examples of apparatus that do[es] not fall within the definition of a mobile phone include satellite navigation devices, devices that are solely PDAs [personal digital assistants] and tablet and laptop computers’.

HMRC guidance – Company mobile phones (480: Chapter 22)