Old mobile phones and captial expentiture

[EvolutionSPM]

Hi All,
Could someone please help me with the question on an old mobile phone and my accounts.

I started my limited company 2 years ago after leaving my previous permanent employment and decided to go limited company/contracting. As I had handed back my blackberry to my previous employer, I took out a personal 2 year contract with a Samsung S3. Had to take our a personal contract, as my company was newly registered and had no credit history. Was advised by my accountant to claim back 90% of the rental. He thought this was reasonable as I needed a phone for work and due to circumstances couldn't get the phone in the company name. The 90%/10% he thought was fair split for business/personal.

2 years down the line and time for a new contract/phone. This time the contract with be in the company name. My accountant, who is also my brother in-law, also buys and sells mobile phones and was previously an HMRC tax inspector. A couple of Saturday's ago, he came round on a personal basis and said he had a buyer for the old phone. I explained I was given it to my son.

On Monday I received an email from him, explaining that as I was claiming the contract from the company, the phone was the companies and therefore I had a buy it back off the company. A fair price would be £140. I work with a number of other contractors and asked around. The responses ranged from "who cares about old mobile phones", "are you being investigated?", "tell him you binned it", "It is over 12 months old and therefore worth nothing", "It is upto the director to calculate deprecation" etc, etc.

What is legal HMRC view of this old mobile phone? Do I have to buy it back, or can it be written off? When I worked at HSBC on a permanent basis, old blackberrys were given to employees "To do with what they want".

Stuart

[CloudWalker]

Phones do tend to get lost

[TheFaQQer]

Was advised by my accountant to claim back 90% of the rental. He thought this was reasonable as I needed a phone for work and due to circumstances couldn't get the phone in the company name. The 90%/10% he thought was fair split for business/personal.

That's very, very, very bad advice. If the contract is in the name of the individual, then you can claim the cost of business related calls. Nothing else.

2 years down the line and time for a new contract/phone. This time the contract with be in the company name. My accountant, who is also my brother in-law, also buys and sells mobile phones and was previously an HMRC tax inspector.

I hope he's better at one of these jobs than he is on giving accurate advice on the taxation of mobile phones.

What is legal HMRC view of this old mobile phone?

The company should never have paid any of the line rental. With such a fundamental fault in the expenses you have claimed, I suspect that an old handset would be the least of your worries.

Fire your accountant, and find someone who knows what they are doing. Or ask him to prove how his advice is correct, given the HMRC employee expenses guidelines.

[TheFaQQer]

For reference, here's what the HMRC employee expenses manual has to say on the matter:

Employee provided mobile phone
Some employees use their own mobile phone to make business calls. As for other telephones, see EIM32940, a deduction can be permitted for the actual cost, necessarily incurred, of telephone calls made by the employee in the performance of the duties of the employment.

[TheFaQQer]

You could also reference this HMRC page:

Definitions or restrictions
You cover the costs of an employee's mobile telephone by reimbursing the employee. The contract for the phone is between the employee and the phone company.

What to report, what to pay
Reimbursements of an employee's monthly mobile phone tariff count as earnings, so:

• add them to the employee's other earnings
• deduct and pay PAYE tax and Class 1 NICs using your usual payroll procedures

If you haven't been doing that, then this opens up a whole other can of worms.

[northernladuk]

Am guessing smaller accountancy practice that doesn't specialise in contractors...

[TheFaQQer]

Am guessing smaller accountancy practice that doesn't specialise in contractors...

No matter how small, you would think that knowing what can and can't be claimed as expenses is a fairly fundamental thing not to know.

[LisaContractorUmbrella]

I really think you should look at getting a new accountant - I can't see that he's given you any advice there which is correct. Other than that have a read through the links TheFaqqer has posted

[northernladuk]

No matter how small, you would think that knowing what can and can't be claimed as expenses is a fairly fundamental thing not to know.

Absolutely but I do know from using a small one man band myself and suffering badly from it they don't dwell on the details and seem to have a 'just do it' approach without considering the risks linked to a one man band company that may not exist with a 'proper' company. The one I used even suggested alphabet shares without warning me of the gotchas.

They just seem a little more slap dash for some reason.

[DaveB]

Am guessing smaller accountancy practice that doesn't specialise in contractors...

My accountant, who is also my brother in-law

Guessing he used him because he was his BIL, not because he was a contractor accountant.

Never, ever, mix business and family unless you absolutely have to.