Are mobile phones a tax deductible perk? Yes, if you avoid the traps! – Michael Lansdell

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  Posted by: Dental Design      12th August 2019

Do you ever wonder how you survived without your smartphone, that tiny glowing screen with its array of enticing apps? Being able to hold the internet in your hand – literally – has certainly made life easier for dentists and dental practice owners, especially if you work at more than one practice and/or attend courses, seminars and conferences. The ease with which you can be connected to your dental team(s) supports workflow and is essential for efficient service delivery.

The evolution of mobile technology has seen a brick-sized mobile phone for making calls morph into a compact, multi-functional smart device that allows fast and reliable wireless connectivity to the internet from almost anywhere in the world. In 1998, the first 3rdgeneration (3G) wireless networks were introduced, with the upgraded 4G 10 years later in 2008 and now 5G is waiting in the wings.

Back when all this was new, the government offered a tax break for companies who paid for an employee or director’s phone, to encourage mobile working. What happened next is that it became commonplace for everyone in the family to own a mobile phone, so HMRC moved to close the loophole to prevent companies supplying multiple phones to their employees, or directors – and therefore enjoying multiple perks.

New rules

Since 2006, a company can only provide onemobile phone to an employee or director. The phone contract mustbe between the phone’s provider and the company and the employee/director must not own the phone in any way. If all the company does is pay the bills, the exemption does not apply.

So, if you are a dental practice owner who pays an employee’s (or director’s) mobile phone bills direct to the phone company, you must declare this to HMRC because it is a taxable benefit in kind. You will have to pay NI on the value; the employee (or director) will not. But, if you reimburse/pay an employee’s (or director’s) bills and can show these charges as relating directly to their job, there will be no tax/NI.

Another trap to look out for is apps, music, movies and the like that are paid for by adding them onto the phone’s monthly bill – these may also be liable to tax. The golden rule if you want to avoid any of the traps is to speak to your accountant.

What about the good news?

The law says that the exemption applies to a mobile phone provided ‘for an employee’. Once the employee has the phone, what they do with it is up to them! So, they could give it to their spouse to use for a period of time and the exemption would still apply. The key here is that it is just one phone and that it has been provided to the employee/director.

But what if you are a dental practice owner who would rather avoid any confusion with HMRC? Well the simple answer is, when you tell an employee/director the terms of use, just don’t mention their family! 

A smartphone is the means by which we stay in touch and avert disaster. We did survive without them, but let’s face it, it is hard to imagine doing so now. If you provide a mobile phone to an employee or director (or if you use a phone given to you by your company) be careful to avoid the traps. Your specialist accountant, like the well-informed team at specialist dental accountant Lansdell & Rose, will help you to steer well clear of the pitfalls.


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