Broadband expenses for limited company directors

Virtually every business in the UK needs broadband access to function these days.

Whether you work from an office or home, internet access is one of the most commonly claimed business expenses for limited companies.

If your company claims the cost of broadband access, you need to make sure that it is an allowable tax-deductible cost.

For an expense to be allowable, you need to demonstrate that the service or product is used wholly and exclusively in the course of your trade. In other words, it is only used for business purposes.

It all depends on how your broadband contract is set up and whether you use it for both personal and business purposes.

Broadband contract in the company’s name

• It is simple to offset broadband expenses against Corporation Tax if you have a business broadband contract in your company’s name at your business premises.
• If the company provides broadband at your home, the tax position depends on why it was provided and the extent of any private use. Simply putting the family’s existing broadband service into the company’s name does not automatically make it tax-free.
• A dedicated broadband connection provided for business purposes is much easier to justify, particularly where any private use is insignificant.

Business use of residential broadband

• If you already have a residential broadband contract, you can’t usually offset the existing monthly cost as a business expense simply because you also use it for work.
• Under HMRC duality of purpose rules, it is hard to prove there is an additional cost to the fee you are already paying anyway.
• If working from home results in an identifiable additional broadband cost, that cost may be claimable.

No existing broadband service at home

• Although unlikely, installing a new broadband service can be an allowable expense if an employee or director doesn’t have a broadband service at home but requires internet access to work from home.
• This is allowable where it represents an additional household cost incurred because the employee needs the connection to perform their work, subject to the relevant conditions.

Further thoughts

If your company simply pays or reimburses the cost of your existing personal residential broadband contract, there can be additional tax and National Insurance consequences because the company is paying a personal liability.

So, in simple terms, the tax treatment depends on how the broadband is set up and who pays the bill.

If you have any questions, ask your accountant.

By far the most straightforward solution is to provide a separate broadband service for genuine business use where practical.

For HMRC’s technical guidance on the tax treatment of broadband, see EIM01475.

Read our complete guide to limited company expenses here.