Mobile phone and landline expenses for limited company directors

If you’re a company director, chances are you use a landline and mobile phone – most likely a smartphone. If you use your phones for business, you may be able to offset the cost against your company’s Corporation Tax bill.

However, not all expenses are allowable. For an expense to be tax deductible, it must be incurred wholly and exclusively in the course of your trade.

In this guide, we look at how phone costs are treated for tax purposes, and what happens if you use your phones for both business and personal reasons.

Mobile phone – contract in your company’s name

• If you have a phone contract in your company’s name, the cost is a legitimate business expense and can be offset against Corporation Tax. HMRC also accepts that some calls will be personal.
• Employers can provide each employee with a single mobile phone or SIM card without any P11D reporting requirements. You don’t need to report this to HMRC, or pay any benefit in kind (BIK) charges.
• If a director has more than one handset provided by the company, the extra handset will be subject to a BIK charge.
• If your company pays for handsets used by family members (who aren’t employees), they will also attract a BIK charge.

Mobile phone – personal contract

• You can’t claim personal costs from your company. If the company reimburses the whole personal contract, the company and individual will normally have to pay additional tax on the amount claimed – due to benefit in kind rules.
• You cannot claim for the costs of a handset or monthly usage charges, as these costs would have been borne by you anyway.
• If you’re able to separate specific business calls from your personal mobile bill, you can reclaim the costs, including VAT where applicable. Given most mobile contracts have all-inclusive minutes, this is likely to be a futile exercise!

Landline phone – contract in the company’s name

• The cost of line rental and calls is a legitimate business expense and can be offset against the company’s profits.

Landline phone – residential contract

• You can claim for the individual cost of business calls only, including VAT where applicable.
• Under ‘duality of purpose’ rules, you can’t claim for line rental on a personal landline account as you’d incur this cost anyway.

Smartphones

Almost all directors use smartphones these days, such as iPhone and Samsung devices. If your device can be used to make calls, then it meets HMRC’s definition of a ‘mobile phone’, provided its main purpose includes transmitting and receiving spoken messages over a public cellular network.

Importantly, other devices – such as most smartwatches and tablets – don’t meet this definition where their main purpose does not include making and receiving voice calls over a public cellular network.

Further information

For further guidance on broadband and phone claims, check out the following manuals from HMRC.

• For landline telephone charges and landline rental, see EIM32940
• For mobile phone charges, see EIM32945

Read our main guide to limited company expenses.