Upgrading a personal mobile phone, paying a lump sum up front for a new handset

[TheCyclingProgrammer]

Your Company Secretary is not an employee, by default, unless you make her one?

You are free to dispose of the old handset as you wish, provided that it was put through your books as an expense, as opposed to having been capitalised and then depreciated.

I capitalise my phone purchases. None of them have been treated as being disposed as they haven't been sold on (although all but my current handset are now fully depreciated). They remain company assets. That said, as an iOS developer, having an older handset as a test device is useful.

The company secretary isn't an employee by default but neither is a director - I don't have an employment contract. The mobile handset rule applies to company officers as much as employees AFAIK.

Either way, very unlikely to be challenged given that the company isn't exactly going out and spending extra money on a handset for her, its being cost efficient and giving her an unused one. Having said that, I don't think there would be an issue if MyCo decided to buy a new mobile handset for both of us (but it won't be as MyCo is tight with it's money and doesn't think she needs one ).

[captainham]

Note that if you sell an asset to your company which has previously been owned by you personally then you will not be able to claim AIA on it. See the below from HMRC's website:

Thanks Craig, didn't know that. Luckily I've never done that myself then!

[Craig at Nixon Williams]

It's not (much) different to the usual advice I see when people have just set up a LtdCo for first time and subsequently sell assets (such as mobile phone) to LtdCo. The usual advice I see in those cases is to get a second-hand value from ebay, but in your case it's a brand spanking new phone which is why I suggested Amazon (or similar).

Note that if you sell an asset to your company which has previously been owned by you personally then you will not be able to claim AIA on it. See the below from HMRC's website:

Any new expenditure on plant and machinery assets bought after 1 April 2008 for Corporation Tax, or 6 April 2008 for Income Tax qualifies for AIA, apart from these exceptions:

• cars - see the section below on capital allowances on cars
• plant and machinery previously used for another purpose, for example, a computer used at home and introduced into your business
• plant and machinery gifted to your business
• expenditure incurred in the accounting period in which your business ceases

[Scruff]

The old handset has been passed on to the wife which, I suspect, is probably against one HMRC rule or another although as she is now company secretary I think I can safely give her the old handset under the same "one handset per employee" rule.

Your Company Secretary is not an employee, by default, unless you make her one?

You are free to dispose of the old handset as you wish, provided that it was put through your books as an expense, as opposed to having been capitalised and then depreciated.

[captainham]

...in the case upgrading is a cheaper way overall to get the handset.

Your situation might be different, but whenever I have totted up the SIM-free route vs subsidised phone route in the past, SIM-free has always worked out cheaper; so much so that it's a no-brainer for me now, I don't even bother to work it out.

Having said that, I love my Nexus phones which you can buy new from Google for a relative pittance, but I imagine a comparison with an iPhone may not come out so strongly in favour of SIM-free as they cost a bloomin' fortune (although I still bet that SIM-free is worth it even then).

[d000hg]

Or just buy a SIM-free phone outright on the company account, switch your contract to a cheaper SIM-only deal then there's far less ambiguity/cause for concern.

This is exactly what I did. It gives me freedom to switch phones whenever I choose.

Yeah this would of course be the simpler option. I was just curious if what I suggested would be allowable, in the case upgrading is a cheaper way overall to get the handset. I was not certain that you own 'your' phone when you are on a contract.

[TheCyclingProgrammer]

Or just buy a SIM-free phone outright on the company account, switch your contract to a cheaper SIM-only deal then there's far less ambiguity/cause for concern.

This is what I'd do. I've been on a personal SIM only deal for years now (with Three currently), £15 a month including 1GB of internet, tethering (not sure its supposed to be active on my plan but it is) and more minutes/texts than I would ever need.

MyCo buys me a new handset every couple of years - I even managed to get one at the same time as a new laptop from once and reclaim the VAT too (same supplier, total over £2k deal) which made it even sweeter.

The old handset has been passed on to the wife which, I suspect, is probably against one HMRC rule or another although as she is now company secretary I think I can safely give her the old handset under the same "one handset per employee" rule.

[TheCyclingProgrammer]

The tricky issue here, from what I can see, is that normally if you were buying the phone outright through YourCo but using your personal SIM (something I do too), you'd expect to have an invoice for the phone in YourCo's name (regardless of whether you are treating it as an expense or a capital purchase). Even more important if you are able to reclaim the VAT on the purchase.

Personally I don't see why you wouldn't be able to treat £x as the cost of providing a handset whilst you continue to pay the monthly contract personally, but I'd talk to your accountant on this one as I think there is still the risk that this could be caught under the "Employer paying supplier for employees own phone" or "Employer reimburses employee for their own phone" category (depending on how its paid) which would make it a P11D reportable expense and liable to Class 1 NICs in the former category or taxable earnings in the latter.

The wording of the exemption is that it applies to an "employer provided phone" which to me could be easily construed as "paid for by the company and given to the employee", not "paid for by employee and reimbursed by company", but its open to interpretation I guess.

[TheFaQQer]

I don't think you can expense "what it should have cost"

Yes you can.

You are selling the phone to a company, so can agree a price with the company that reflects the value of the item.

[cojak]

Or just buy a SIM-free phone outright on the company account, switch your contract to a cheaper SIM-only deal then there's far less ambiguity/cause for concern.

This is exactly what I did. It gives me freedom to switch phones whenever I choose.

[captainham]

Or just buy a SIM-free phone outright on the company account, switch your contract to a cheaper SIM-only deal then there's far less ambiguity/cause for concern.

[captainham]

I don't think you can expense "what it should have cost"

Unless you meant the company could buy the phone? But when you get a phone on contract, do you actually legally own the phone to sell?

It's not (much) different to the usual advice I see when people have just set up a LtdCo for first time and subsequently sell assets (such as mobile phone) to LtdCo. The usual advice I see in those cases is to get a second-hand value from ebay, but in your case it's a brand spanking new phone which is why I suggested Amazon (or similar).

So yeah, the Co would then own the phone outright. You do legally own it as the monthly contract has subsidised the phone, and if you try to break the contract early, all that will happen is the provider will charge you the full whack of the outstanding contract anyway. So it's yours from the outset, you're just paying in installments.

[d000hg]

I would have said Yes.

Alternatively, what about paying £X yourself, then expense the full retail value of the handset to your Co (print out an Amazon screenshot or similar, with date, for your records)...?

I don't think you can expense "what it should have cost"

Unless you meant the company could buy the phone? But when you get a phone on contract, do you actually legally own the phone to sell?

[captainham]

Does £X count as the cost of purchasing the phone, something you can claim back?

I would have said Yes.

Alternatively, what about paying £X yourself, then expense the full retail value of the handset to your Co (print out an Amazon screenshot or similar, with date, for your records)...?

[d000hg]

I'm aware that a personal mobile phone contract cannot be expensed, if you want your company to pay your contract then the contract needs to be in the company's name.

I'm also aware that the company can buy a handset outright, for you to use with your personal contract SIM.

But what happens if you take out a personal contract where you pay £X up front to get a fancy handset, and then £Y per month. Does £X count as the cost of purchasing the phone, something you can claim back?