Produced by Tolley

The following Employment Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Telephones
  • Mobile phones
  • Exemption for provision of mobile phone
  • What is a mobile phone?
  • Hands-free kits
  • Exemptions and deductions for mobile phones for business use
  • Mobile phone as a general business expense
  • Mobile phone where there is a deduction available
  • Exemption for accommodation, supplies and services used in employment duties applicable to mobile phones
  • Reporting where mobile phone is a taxable benefit
  • More...


Mobile phones

Exemption for provision of mobile phone

The provision of mobile phones to employees is a common benefit. There is a general exemption from tax and NIC. In some circumstances, a tax and NIC liability may arise.

The exemption in ITEPA 2003, s 319 covers the following:

  1. the provision of one mobile phone to an employee (the employer must retain ownership of the mobile phone). In this context, ‘mobile phone’ can include a physical phone with a sim, just a sim, or multiple items for different connections as long as the connections relate onto to one phone number

  2. the line rental and the cost of all calls associated with that mobile phone

The exemption covers any amount of private use. For practicality, employers are likely to limit use outside the limits of the phone’s regular contract cost to limit their cost, but this does not affect the PAYE position.

HMRC guidance is at EIM21779. See more in Simon’s Taxes E4.779A

Where an employee is required to use a mobile phone for business calls, then the cost of the call is allowable as a business expense under the general expense rule, see the Business expenses ― general rule guidance note. This will usually be in the form of a claim made by the employee for the cost of the business calls and a reimbursement.

What is a mobile phone?

The development of mobile technology has meant that HMRC has had to give guidance on what it accepts as a mobile phone. HMRC accepts that ‘smartphones’ are mobile phones for the purposes of the exemption such that issues on the definition now rarely arise. Therefore, mainstream smartphones, such as an iPhone or Android device, are mobile phones for the purposes of the exemption.

HMRC will not accept that a landline or wireless extension to a landline as a mobile phone. Nor will they accept any primarily designed to be something other than a phone ― so tablets, sat navs and laptops

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