Reply to: Old mobile phones and captial expentiture

[Scruff]

Please bear in mind that you (can) have different calculations for accounting and tax purposes. For example, you can capitalise and depreciate the phone for accounting purposes but deduct the whole amount in calculating the Corporation Tax payable....👿

[Taita]

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.


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


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.

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

Difficult not to conclude that he makes his 'main' living from mobiles!

[TheFaQQer]

The phone is with o2.
-Can't be in companies name, as new company with no credit history.
-Registered in my name (100% shareholder/director) and at the companies registered address.
-Will move to companies name as earliest opportunity - already done.
-My company stationery, CV, linkedin, etc quotes the work number
-I have a basic pay as you go mobile and keeping top-up receipts as evidence. I switch off the work one at weekends/holidays.
-The company needed a phone number and for various reasons can't use the home phone. Also not good when traveling for interviews/client site etc.
-I needed to access emails/linkedin/internet/cv updates whilst on the move.

All of these are irrelevant as far as HMRC's expenses manual and guidance (and the law) are concerned.

-To cover my access of personal internet (bbc news, facebook,etc) on the move, I reimburse the company 10% per month.

That's not what you said you were doing - you said that you had a personal contract and the company paid 90% of it. Does the company pay 100% and you then repay 10% or is it as you described?

HMRC have approved this.

That's the only relevant information that you need - as long as HMRC have agreed that you can deviate significantly from the way that expenses should be processed, then you are golden. I hope you got it in writing, though - make sure you keep it safe because what you are doing deviates significantly from what HMRC publicaly say and the law around this area, so if there was an investigation then you would need to show how the way you operate has been given clearance / dispensation from HMRC.

[TheCyclingProgrammer]

If it is the companies you need to determine the length of time over which company assets are depreciated (you have to declare this as part of your accounts, as company director you are in apposition to set policy on this).
Many companies operate a policy whereby depreciated kit is offered to employees for a nominal amount or free. If you have had the phone for two years and the companies depreciation policy writes it off after two years then the net value to the company is Zero and you can legitimately give it to yourself at zero cost provided the disposal is properly recorded.

This assumes the item was capitalised in the first place of course.

Also, even if an asset is fully depreciated in the company's books that doesn't mean it has no second-hand value. Assets given to directors/employees at less than market value can still potentially incur a BIK.

I doubt HMRC would argue the toss over a phone as the second-hand value is likely to be negligible but for more expensive assets (e.g. laptops) its worth bearing in mind. The second-hand value of the asset would need to be reported on a P11D, less any money actually paid for the asset.

http://www.hmrc.gov.uk/payerti/exb/a...nsferred.htm#2

The company will also have to charge VAT on any sale of an asset if VAT registered. Additionally, if you are on the flat-rate VAT scheme and you originally reclaimed the VAT on the asset as it was part of a single purchase over £2k, then you must report the VAT on the sale of the asset at the full rate on your VAT return, rather than as part of your flat-rate turnover.

[TheCyclingProgrammer]

...snip...

HMRC have approved this.

Stuart

Out of interest, who pays the bill? Does YourCo pay the bill directly? If so, and the phone really is only used for business purposes, then this is allowable even if the contract is in your name (see the exception I posted earlier). This might be why HMRC have said it is allowed. But if you're paying the bill and the company is just reimbursing you, then this should still really be treated as earnings. There is no exception.

[DaveB]

Regarding the original question on do I need to buy the phone off the company? Is this correct? I am getting conflicting advice on this.

Stuart

You bought the phone in your name, with your own money. In the absence of a company policy that says payment of phone expenses has the effect of transferring a personal phone to the business I would say it is still yours.

If it is the companies you need to determine the length of time over which company assets are depreciated (you have to declare this as part of your accounts, as company director you are in apposition to set policy on this).
Many companies operate a policy whereby depreciated kit is offered to employees for a nominal amount or free. If you have had the phone for two years and the companies depreciation policy writes it off after two years then the net value to the company is Zero and you can legitimately give it to yourself at zero cost provided the disposal is properly recorded.

[EvolutionSPM]

You got HMRC to agree that you could deviate from their expenses manual just because you were a new company?

Is the phone contract with Vodafone?

The phone is with o2.
-Can't be in companies name, as new company with no credit history.
-Registered in my name (100% shareholder/director) and at the companies registered address.
-Will move to companies name as earliest opportunity - already done.
-My company stationery, CV, linkedin, etc quotes the work number
-I have a basic pay as you go mobile and keeping top-up receipts as evidence. I switch off the work one at weekends/holidays.
-The company needed a phone number and for various reasons can't use the home phone. Also not good when traveling for interviews/client site etc.
-I needed to access emails/linkedin/internet/cv updates whilst on the move.
-To cover my access of personal internet (bbc news, facebook,etc) on the move, I reimburse the company 10% per month.

HMRC have approved this.

Stuart

[TheCyclingProgrammer]

Regarding the original question on do I need to buy the phone off the company? Is this correct? I am getting conflicting advice on this.

Who bought the phone? It sounds like you bought it (or you paid for it over time as part of your monthly contract). If the contract was in your name, then I'd say the phone belongs to you.

[TheFaQQer]

Due to mitigating circumstances at the time we had to go down this route and we have approval off the HMRC for this.

You got HMRC to agree that you could deviate from their expenses manual just because you were a new company?

Is the phone contract with Vodafone?

[EvolutionSPM]

If the phone is purchased by the company then it belongs to the company and how you account for the sale depends on whether the phone was capitalised or not.

Thanks, will look further into this.

Stuart

[EvolutionSPM]

Thanks all for your responses. I am not 100% happy with the accountants service at the moment, hence the questions on here. Just finishing up a contract at the moment, it is nearly my end of year accounts and will look at choices then, I understand the rules on mobile phones, i.e.. personal contact = claim business calls only, business contract = claim monthly charge/calls. Due to mitigating circumstances at the time we had to go down this route and we have approval off the HMRC for this. The contract is now in the name of the company.

Regarding the original question on do I need to buy the phone off the company? Is this correct? I am getting conflicting advice on this.

Stuart

[TheCyclingProgrammer]

You could also reference this HMRC page:

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

Not relevant here, but something I recently noticed is that it is possible in limited circumstances for an employer to pay for an employee's mobile when the contract is in the employee's own name *if* a) the employer pays the supplier directly and b) the phone/contract was purchased business purposes AND only used for business calls. (see the exemption under the "Employee's own mobile - you pay the supplier directly" section on the same page).

Of course, this is quite limiting and you'd probably have to demonstrate that its not used for personal calls. Seems a silly way of doing things when YourCo can provide you with one phone to use as you like as long as you get it in the company name.

OP: you shouldn't have been apportioning your contract rental as others have been pointing out to you although if you were advised to do so by your accountant I guess its not entirely your fault. I wouldn't worry about it too much...its unlikely to be an issue unless you have a compliance check and even then I think you'd have a reasonable defence against any penalties. But you'd still be liable for underpaid tax and NIC.

Regarding selling the phone, if the contract was in your name then the phone belongs to you. You are free to do what you like with it - sell it, give it away.

If the phone is purchased by the company then it belongs to the company and how you account for the sale depends on whether the phone was capitalised or not.

[TheFaQQer]

Not being able to expense a mobile phone unless its in the company name (and the money needs to come directly out of the company account I might add) is expenses 101, god only know what a mess your accounts are in, get a professional contractor accountant in and pay her whatever its takes to sort this mess out.

FTFY

[kal]

Not being able to expense a mobile phone unless its in the company name (and the money needs to come directly out of the company account I might add) is expenses 101, god only know what a mess your accounts are in, get a professional contractor accountant in and pay him whatever its takes to sort this mess out.

[northernladuk]

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.

Would love to be there when he sacks him for being tulip lol!! Someone won't be getting their oats for awhile!