Produced by Tolley in association with Philip Rutherford

The following Employment Tax guidance note Produced by Tolley in association with Philip Rutherford provides comprehensive and up to date tax information covering:

  • Telephones
  • Introduction
  • Employer pays for a landline
  • Contract between employer and provider
  • Contract between employee and provider, employer pays provider directly
  • Employee pays for a landline
  • Other telephone related costs
  • Calls in the performance of duties ― expenses treatment



This guidance note deals with employee home telephony costs and not mobile phones. For details on mobile phones, see the Mobile telephones guidance note.

The provision of home telephony benefits is not covered by specific legislation. Instead, consider the nature of the costs, who is paying for the costs and the reason for the expenditure. The tax, NIC and reporting requirements will follow.

For employees, telephone expenses (except for the mobile phone exemption) can qualify for a deduction if they meet the general rule conditions in ITEPA 2003, s 336. This means that the expenses must meet the wholly, exclusively and necessarily test.

For the purposes of this section a telephone covers the provision of a landline telephone or a wireless extension of a landline network, such as a cordless telephone.

Employer pays for a landline

Where an employer pays a phone company directly there will be one of two different types of contractual arrangement in place. If the employer has a contract with the provider then there is a benefit to the employee and Class 1A NIC is appropriate. If the contract is between the employee and the provider then the employer is meeting a liability of the employee and Class 1 NIC is the appropriate contribution. Both are considered below.

Contract between employer and provider

If an employer pays for an employee’s home landline and all associated calls the

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