Mobile phones

[Fred]

Two mobile phones have been made available to two directors. However the
contracts are in their own personal names and not in the name of the
company. The contacts are being paid by DD directly from the company
account with the intention of them being "company" phones.

Does this make give them any tax liability?

 

[Mike Lewis]

Two mobile phones have been made available to two directors. However the
contracts are in their own personal names and not in the name of the
company. The contacts are being paid by DD directly from the company
account with the intention of them being "company" phones.

Does this make give them any tax liability?

It could do, plus class 1A liability for the company.

 

[Ronald Raygun]

It could do, plus class 1A liability for the company.

Presumably this would hinge, as with company cars, on whether
they were "available for" private use. Unlike with cars, though,
there is the added complication that phones are capable not only
of active but also of passive private use. What if they never
make outgoing personal calls but do receive incoming ones?

 

[Fred]

Presumably this would hinge, as with company cars, on whether
they were "available for" private use. Unlike with cars, though,
there is the added complication that phones are capable not only
of active but also of passive private use. What if they never
make outgoing personal calls but do receive incoming ones?

Mobile phones provide by an employer are specifically exempt from any
liability irrespective of whether they are available for private use or not.
This change was in 1999 or so. Before that either the employee had to pay
tax on £200 or had to pay his private usage. Complaints from both sides in
respect of the real cost of administering such schemes resulted in company
provided mobile phones being exempt from any employee tax liability or the
logging of private calls. Company mobile phones are therefore not like
company cars. Indeed it is an overlooked perk which can be given very
cheaply to staff.

My question was where directors or employees had arranged such phones but in
their own name where the company footed the bill. A director is a strange
quantity since most things he does associated with his company are deemed to
be done on behalf of the company.

 

[Andy Lord]

Presumably this would hinge, as with company cars, on whether
they were "available for" private use. Unlike with cars, though,
there is the added complication that phones are capable not only
of active but also of passive private use. What if they never
make outgoing personal calls but do receive incoming ones?

Irrelevant surely. The contracts for the mobiles are in the names of the
directors, payments made for the mobiles on behalf of the directors are
therefore taxeable benefits except to the extent that it can be proven that
call costs paid for by the company were allowable business expenses. AFAIR
no part of the line rental on private phones is an allowable expense.

The best thing to do would be to have the company take over the contracts on
the mobiles. You may be surprised how easy it is for even a newly formed
limited company to pass the credit checks required by mobile phone
companies.

Andy

 

[Simon]

Two mobile phones have been made available to two directors. However the
contracts are in their own personal names and not in the name of the
company. The contacts are being paid by DD directly from the company
account with the intention of them being "company" phones.

Does this make give them any tax liability?

IMHO Yes. Not only is their a risk of a tax liability, it is a pecuniary
liability and so NI is due. NI Regs are worse than tax.

S336 ITEPA 2003 formerly S198 ICTA 1988 says any cost that can be shown to
be wholly, necessarily incurred in the course of the duties can be claimed.
For NI, the expense has to be specific a distinct.

If you get itemised calls and you can state which ones are business and
which private, then you can apportion the costs but is is worth it.

Get rid of the phones or dont use them for work. Get new lines contracted
for by the company and none of the above applies. No liability arises as
they are specifically exempted. Its just not worth the argument, paper work
and fees sorting it all out.

Simon

 

[Ronald Raygun]

Irrelevant surely. The contracts for the mobiles are in the names of the
directors, payments made for the mobiles on behalf of the directors are
therefore taxeable benefits except to the extent that it can be proven
that call costs paid for by the company were allowable business expenses.
AFAIR no part of the line rental on private phones is an allowable
expense.

The best thing to do would be to have the company take over the contracts
on the mobiles. You may be surprised how easy it is for even a newly
formed limited company to pass the credit checks required by mobile phone
companies.

I don't think so. Surely what matters is who really pays for it, not
whose name the contract is in. If the director's "personal" contract
is wholly on behalf of the company, then there is no reason to assume
that they are in any way "private phones".

It's a similar distinction to that between legal and beneficial
ownership of something like a house.

 

[Simon]

Mobile phones provide by an employer are specifically exempt from any
liability irrespective of whether they are available for private use or
not.
This change was in 1999 or so. Before that either the employee had to pay
tax on £200 or had to pay his private usage. Complaints from both sides
in
respect of the real cost of administering such schemes resulted in company
provided mobile phones being exempt from any employee tax liability or the
logging of private calls. Company mobile phones are therefore not like
company cars. Indeed it is an overlooked perk which can be given very
cheaply to staff.

My question was where directors or employees had arranged such phones but
in
their own name where the company footed the bill. A director is a strange
quantity since most things he does associated with his company are deemed
to
be done on behalf of the company.

Granted that they act as part of the company but they are also lawful
entities, just like the rest of us. If the enter intyo a contract for the
company, they have to state that they are acting in that capacity.

If a director walks into Carphones 4US and buys a contract phone, then it is
he that is entering into the contract unless he specifically states that the
contract is with "nosuch co ltd".

It has been posted elsewhere that company phones are exempt. Available for
private use is car specific. Any other expenses or benefits have to be
wholly exclusively etc.

Simon

 

[Andy Lord]

I don't think so. Surely what matters is who really pays for it, not
whose name the contract is in. If the director's "personal" contract
is wholly on behalf of the company, then there is no reason to assume
that they are in any way "private phones".

It's a similar distinction to that between legal and beneficial
ownership of something like a house.

Not at all. No contract for services exists between the company and the
mobile phone company, therefore any payments made by the company are either
taxable benefits or reimbursed expenses.

Andy

 

[Mike Lewis]

I don't think so. Surely what matters is who really pays for it, not
whose name the contract is in. If the director's "personal" contract
is wholly on behalf of the company, then there is no reason to assume
that they are in any way "private phones".

No, what matters is whose name the contract is in. If the contract is in the
directors personal name then the company paying the bill is discharging the
directors personal liability to pay the bill. If there is any private use of
the phone then NI is due on the whole payment. PAYE might also be due, not
sure off the top of my head. But tax is due on any private calls the company
pays for.

The only way out is to swap the contracts into the company's name.