This article is relevant for limited companies.

The tax treatment of mobile phones varies depending on whether the contract is between the mobile phone company and the employer or the employee.

If the contract is between the mobile phone company and the employee, the rules differ depending on whether the employer reimburses the cost. It’s important to note that a company director would also be considered an employee of that company, and the company itself would be the employer.

There is a tax exemption where an employer provides a mobile phone for an employee, irrespective of the level of private use. The exemption applies to one phone per employee.

However, the exemption does not extend to top-up vouchers that can be used on any phone or where an employer pays an employee’s private mobile phone bill.

The provision of a mobile phone may also be exempt where it is provided solely for business use, and any private use is not significant. This exemption is not limited to one mobile phone per employee and might be useful for internationally based employees to take advantage of the best tariffs in each country. However, employers would need to consider how to monitor and limit private use.

If the employer reimburses the employee for the cost of business calls that the employee has incurred, this should be exempt from Income Tax, provided the employee incurs an additional cost. Where there is no additional cost for the employee (for example, where the employee’s mobile package is for a fixed amount each month), the exemption will not apply.

If the employee bears the cost of business calls and is not reimbursed, HMRC accept that the employee should be able to claim a deduction where the cost of business calls is identifiable. No deduction will be possible where the employee’s mobile package is for a fixed amount.