Contractors' Questions: How to charge client calls from my mobile?

Contractor’s Question: I have a personal mobile phone account but I’m not on a contract, rather it’s a pay-as-you-go deal every 30 days. As it's essential for my business, I plan to start paying the bill for my mobile phone through my limited company’s bank account.

However, does my mobile phone account need to be in the name of my company for me to do this properly? Or can I just switch the direct debit over, so it pays out of my business account instead of my own? And what matters as far as the taxman is concerned?

Expert’s Answer: If a taxpayer has a mobile phone that is used for both business and private communications, then an allowance is due for the business calls only. This means it is necessary to keep a log of the calls made from the phone, so that the business element can be quantified.

If it is not possible to quantify the business element, then no allowance is due. This may seem harsh but the law is that the expense must be "wholly and exclusively" laid out or expended for the purposes of the trade.

This means that unless you can identify the element that is wholly and exclusively business, no allowance is due. Moreover, a contract phone will not qualify as it is impossible to identify the business element.

However, a company can provide an “exempt” mobile phone (so yes it should be in the name of the company) as long as it falls within these guidelines spelt out by HM Revenue & Customs. Still, ensure you pay close attention to the definition of a mobile phone as you may find that, for example, an iPhone will not qualify.

The expert was Bob Jones, a former Inland Revenue tax inspector and the founder of expenses advisory internet-taxation.co.uk. 

Feb 04, 2011