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I'm on the train
We believe that the provision of a mobile phone and the payment of all private call charges does not confer a taxable benefit on the employee although there is full tax relief for the business.
We would like clarification that this rule applies to unincorporated as well as incorporated businesses and that it applies to all employees.
I'm on the train
We believe that the provision of a mobile phone and the payment of all private call charges does not confer a taxable benefit on the employee although there is full tax relief for the business.
We would like clarification that this rule applies to unincorporated as well as incorporated businesses and that it applies to all employees.
The provision of this benefit would seem to be an excellent way of providing tax-free remuneration including free benefits to family members, but reader's advice and comments on any potential pitfalls that we might be missing would be welcomed.
(Query T16,155) - Commuter.
The exemption from the general charging rule for benefits in section 154, Taxes Act 1988 is contained in section 155AA of that Act. The legislation provides that a Schedule E income tax charge shall not arise where the benefit consists in a mobile telephone being made available (without any transfer of property in it) to an employee or to a member of his family or household.
No distinction is drawn in the legislation between an employee of a limited company or an employee of a sole trader or partnership. Therefore, subject to the following caveats, the provision of a mobile telephone for the personal use of an employee will not give rise to a tax charge on the employee, irrespective of whether the employer is a limited company, a sole trader or a partnership.
The first caveat to mention is that, for the exemption to apply, ownership of the mobile telephone must not pass to the employee, but must remain with the employer.
Secondly, for the employer, the problem associated with providing a mobile telephone to a family member will be whether the amount spent on the telephone by the business has been incurred wholly and exclusively for the purposes of the business as required by section 74, Taxes Act 1988. Where the amount paid for the mobile phone plus any cash salary is such that the total package is not commensurate with the duties performed, the excess will be disallowed under section 74(1)(b) as an amount laid out for domestic as opposed to business purposes.
The benefit could be useful if a spouse has a wage of just below the National Insurance threshold, but her duties could support a higher wage, but this has not increased because of the high National Insurance cost of so doing. In such a case, a mobile phone could be provided to the spouse with no taxable benefit and in all probability the costs of the phone would be fully tax deductible.
Depending on the tariff used with the phone, an excessively loquacious spouse could create a tax disallowance if the phone bills were sufficiently high.
Phones could possibly also be provided to the children of a sole trader or partner. They could be provided to the children themselves if they are employees and their duties warrant it; or they could be provided to their mother, if she is an employee, because (as mentioned above) the exemption includes mobile phones provided for the use of the family or household of an employee. There is no limit on the number of phones provided to a single employee that can be covered by the exemption. - Hodgy.
From 1999-2000, making available the use of a mobile phone to an employee or to a member of his or her family or household does not result in a Schedule E benefit being charged on the employee (section 155AA, Taxes Act 1988). This extends to a mobile in a motor vehicle, but not to a cordless or telepoint phone.
Exemption also applies to the cost of calls (see Hansard Standing Committee B, col 369). It should be remembered that the exemption for both the mobile phone and calls applies only where the phone is owned or rented by the employer. It does not apply where the employee rents his own phone and re-charges it to the employer. It makes no difference whatsoever whether the employer is a company or an unincorporated business.
It can be seen that it is much more attractive to the employee if he is supplied with a mobile phone rather than a fixed telephone. It is therefore a 'good perk', but the employer might not agree if the phone is regularly borrowed by the teenage children of the employee! - Socrates.
