Contractors' Questions: Can I save myself £799 by my limited company buying me an iPhone15?

Contractor’s Question: Having been with my mobile phone provider for ages and never received an upgrade, I’m now eligible to upgrade my antiquated Samsung handset for an iPhone15. I’m looking at the £799 entry model.

Can my limited company pay for the iPhone outright, and because personal/private usage will be minimal as it will be used for business, can I expense all calls, and the entire £799?

I understand from this article that the above is possible. Also, I’ve used my old Samsung since my company was formed about a year ago, but as I did not realise the company could pay for the iPhone – can I now retrospectively claim back both the handset charge and fees for all calls placed since 13 months ago, where I can identify those calls as business calls (should I need to)?

Expert’s Answer: Very few of us can now live our lives without a smartphone let alone run a contractor business without one!

So it’s natural to explore the possibility of having your limited company cover the cost of the latest iPhone, as well as the ongoing expenses.

Purchasing an iPhone

Your intuition is correct – your limited company can indeed pay for the iPhone15 outright.

But there are first a few things to be aware of. For the cost of the phone, and the ongoing contract costs, to be classified as a tax-deductible business expense, the phone-contract needs to be in the name of your company and any personal use must remain within reasonable limits.

HMRC’s exemption also applies to you as an individual. Basic tax principals would indicate that if your company provides you with an asset, that is used personally as well as for the business, a benefit in kind occurs on which you should be taxed.

No P11D benefit

HMRC’s exemption in relation to phones confirms this is not the case and so no P11d benefit arises if the conditions are met.

This exemption can be a significant advantage for limited company-owners looking to streamline expenses without the burden of additional tax implications for themselves (and potentially their employees too).

It is worth noting that if the phone contract is not in the name of the company, or your personal usage is excessive, then you will need to apportion the initial purchase price and call-costs on a reasonable basis, given the business versus personal use split.

Retrospective claims

While it is frustrating for you not to have not claimed 100% of your phone costs over the last 13 months, you need to proceed with caution.

If the contract for your old Samsung phone was in the name of the company, then it would be possible to go back and claim the cost along with all call costs, assuming that the personal element is reasonable.

However, if the phone contract was taken out in your personal name, all you can do is look to reclaim the business element of your costs over that period.

In making a retrospective claim, it is important you can justify and evidence the amounts involved. To support any such claim you should compile a comprehensive record of business calls made using your old Samsung phone.

Whether through call logs, notes, or any other method that suits your business, having a robust documentation system is crucial. Being able to identify and separate business calls from personal ones will strengthen your claim, should HMRC raise any concerns.

Other company assets?

In closing, please note although upgrading your smartphone and having your limited company foot the bill for your handset of choice, an iPhone 15, is not only feasible but also a financially strategic move (given the exemption afforded by HMRC), don’t be tempted to assume it applies to any other assets your company may provide to you.

Where a company asset is made available to a director, employee, or their family for private use, a benefit-in-kind tax charge will arise. It doesn’t matter whether the asset is used personally, it is the ability to use the asset which could result in the tax charge. The amount of the benefit-in-kind in these circumstances is the “annual value” of the asset, calculated at 20% of the market value of the asset when first provided as a benefit. As I said, proceed cautiously and when in doubt consult a contractor accountant.

The expert was chartered accountant Helen Christopher.

Tuesday 30th Jan 2024
Profile picture for user Helen Christopher

Written by Helen Christopher

Chartered accountant Helen Christopher is a former head of finance & accounting and a former chief operating officer, who has worked for 28 years in corporate roles. Helen qualified as an accountant in 1995 with Price Waterhouse (now PwC) – the year she became a member of the ICAEW, and seven years prior to her becoming an FCA. Also a local magistrate for the Department of Justice, Helen specialises in tax, accounting and HMRC advice for small companies and their owners. 
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