Share this content
0
10
2929

Directors own mobile phone

If the company pay the bills direct, this is liable to NI through the payroll in the normal way, but not tax if my understanding is correct.

Does this mean it is not allowable as a CT deduction in the company?

Thank you in advance (hopefully)

Replies

Please login or register to join the discussion.

avatar
17th Apr 2012 11:47

It's all remuneration of one type or another
Dear OGA,

I guess you are referring to personal bills of a director or employee of a company. You are correct about the treatment as salary for tax and NI purposes. However the payment will count as a taxable employee benefit-in-kind, the flip side of this being that it represents employee/director remuneration and so will be a CT deductible expense for the company.

Thanks (0)
avatar
By Old Greying Accountant
17th Apr 2012 12:16

So ...

... when HMRC manual says this:

For company directors or employees earning at a rate of £8,500 or more per year, unless the exception outlined below applies:

report on form P11D - section Badd the value of the benefit to the employee’s other earnings when deducting and paying Class 1 NICs (but not PAYE tax) through your payroll

It means the tax bit will be adjusted via the tax code?

Think I get the logic now! - if company pays you and you pay bill it gets added to payslip for tax, if company pays bill direct on your behalf it gets coded out and only NI charged on payslip (although tax is by default through tax code reduction)?

 

 

Thanks (0)
avatar
17th Apr 2012 12:14

Yep!

That's right. Tax collected via code and or SA.

Thanks (0)
avatar
By Old Greying Accountant
17th Apr 2012 12:17

Thanks

From what the client tells me the tax free status of a company contract phone is a bit of an Indian gift, as the higher tariffs offset the tax savings pretty much anyway! 

Thanks (0)
avatar
24th Apr 2012 11:26

What if the Limited Company works from the director's residence.

Hi,

From the above, if the director is the only is the only employee on the pay roll of the limited company and works from home. How will moblie phone, BT landline and utility bills be treated?

Thanks in advance.

Thanks (0)
avatar
24th Apr 2012 11:59

No difference where

Hi omoakin1,

It makes no difference what the service is or where it's supplied e.g. in the office or a directors home. -If the service is contracted for by the company with the supplier, and the company and pays the bill direct it will be a benefit-in-kind for tax and NI purposes. The benefit must be reported on form P11D and class 1A NI paid and reported on P11D(b).

I hope I haven't misunderstood your question.

 

Thanks (0)
avatar
24th Apr 2012 12:08

and......

....having seen OGA's reply I can confirm that the director in your question could claim a tax deduction for the cost of business calls and a dedicated business line from the benefit-in-kind.

OGA's suggestion to have a licence agreement whereby the company pays rent to the director for use of his or her home is a solid idea and one we often extol in our publication. One tip - if the director's home is in joint names make sure the licence agreement is too.

 

Thanks (0)
avatar
02nd May 2012 13:22

Hi Tony,

Thanks for your update on the initial question. Please what if the house is rented from a private landlord, will the licence agreement still suffice? Thanks

Thanks (0)
avatar
02nd May 2012 14:52

Private landlord

Hi omaokin1,

I assume by "pirvate landlord" you mean someone who doesn't rent out the building commercially. It doesn't matter whether a rental charge relates to a licence to occupy land or buildings, or a lease or rental agreement the result for tax purposes for both the landlord and the property user (tenant) are the same. The short answer to your question is therefore; yes, a licence agreement will surfice.

TC

Thanks (0)
avatar
By Old Greying Accountant
25th Apr 2012 12:07

The company ....

... will need its own telephone lines, otherwise only clearly identied business calls can be reclaimed (no line rental can be). If it is a mobile in the directors own name the above rules apply.

As for utilities, normally you would work out a rent/licence charge that the director will charge the company and this will be covered by a relevent proporton of the cost of running the home to give a nil gain/loss situation on the director personally.

Thanks (0)