Mobile Phone Contracts in Limited Company Name

[Scott P]

Hi,

I seem to have had some conflicting advice from Accountants and the guides from HRMC, so I am wondering if anyone can help.

I have just set up a Limited Company, which me and my brother will be joint directors. At present I have a personal phone contract and my brother has a business contact in his Sole Trader Business name. He has classified this as 80% Business Use, 20% Personal at present.
When we start trading under the Limited Company, if we set up 2 contacts in the Limited company name (or simply transfer ownership of our exisiting 1's into the Limited Company, as Vodafone have advised us is the best way), how much can we offset against comporation tax, or how much of a liability would we have personally?
The contacts would be SIM only deals as we both have phones we are happy to keep for a few years anyway, if that makes a difference.

Any help would be really great.

Thanks!

PS - If I were to split my own usage, it would probably be 30% Personal, 70% Business.

[Billmccallum]

How much do you and your brother expect to spend on phone calls?

I used to have a personal mobile that I used for business, but as the contract was only £35 a month I just paid the bill myself rather than get embroiled in accounting nonsense for such a small amount.

[Batra Ventures UK Limited]

I think I read somewhere as long as your plan covers your personal usage (fair amount) there shouldnt be a problem.

[MyAccountantOnline]

Hi Scott

If your company provides you, as an employee with one mobile phone (and it can be used both for business and private calls) the company can claim it as an expense and doesnt have to pay any tax or NIC on the benefit or report it on a P11D.

If you want some really clear guidance on other scenarios have a look here - http://www.hmrc.gov.uk/paye/exb/a-z/t/telephones-mobile.htm

[Scott P]

Billmccallum - I would say it would be very rare for us to exceed the price plan, and we were looking at £15pm contracts, just for the SIM Card.

Batra Ventures UK Limited - Yeah I read that too, but then a few accountants have told me that we need to make a contribution personally otherwise there would be a benefit in kind charge.

Nicola J - Thanks for that, it seems even clearer than the other guide I read. So we could transfer both our contracts into the Ltd company name, and then they would be classed as a business expense, regardless of the usage?

Thanks again everyone!

[elainec100@cheapaccounting]

Nicola J - Thanks for that, it seems even clearer than the other guide I read. So we could transfer both our contracts into the Ltd company name, and then they would be classed as a business expense, regardless of the usage?

Thanks again everyone!

yes regardless of usage assuming it is just a phone.

See the post in Blackberries here:


http://www.ukbusinessforums.co.uk/forums/showthread.php?t=164723

[MyAccountantOnline]

Nicola J - Thanks for that, it seems even clearer than the other guide I read. So we could transfer both our contracts into the Ltd company name, and then they would be classed as a business expense, regardless of the usage?


Yes thats correct but as Elaine mentions bear in mind different rules apply for the Blackberry.

[Scott P]

Well the phones are smartphones, not BlackBerries, but we already have these so the business will only be paying for the contract, which has free internet. The internet is only used for business emails anyway.

Will this make a difference?

Thanks

[Scootek]

How much do you and your brother expect to spend on phone calls?

I used to have a personal mobile that I used for business, but as the contract was only £35 a month I just paid the bill myself rather than get embroiled in accounting nonsense for such a small amount.

I agree with teh above poster. Secondly, the deals are much better on personal contracts. You will find phone providers taking advantage of you as a business customer.

I would keep it personal. On a seperate note, it's not good idea to run a sole trader and be a director of limited company at the same time. I am not an accountant, but I have been advised that HMRC etc look at it suspiciously. I am sure others can correct me if I am wrong.

[MyAccountantOnline]

Well the phones are smartphones, not BlackBerries, but we already have these so the business will only be paying for the contract, which has free internet. The internet is only used for business emails anyway.

Will this make a difference?

Thanks

HMRC refer to Personal Digital Assistants such as the Blackberry - have a read here

http://www.hmrc.gov.uk/guidance/480_chapter22.pdf

[David Griffiths]

On a seperate note, it's not good idea to run a sole trader and be a director of limited company at the same time. I am not an accountant, but I have been advised that HMRC etc look at it suspiciously. I am sure others can correct me if I am wrong.


That's a very vague comment. There can be circumstances where it is inadvisable, or at least won't achieve what the business owners want it to, and there can be circumstances where it isn't a problem at all.

[MyAccountantOnline]

I agree with teh above poster. Secondly, the deals are much better on personal contracts. You will find phone providers taking advantage of you as a business customer.


If you can claim tax relief on an expense I'd do so:)


On a seperate note, it's not good idea to run a sole trader and be a director of limited company at the same time. I am not an accountant, but I have been advised that HMRC etc look at it suspiciously. I am sure others can correct me if I am wrong.

We disagree on that one. I have never seen any evidence showing that HMRC can or would look at a genuine case in this way.

[Scott P]

Scootek - I agree about the issue with the contracts, but as long time customers, Vodafone do have a bit of negotiation. We have got 900 Mins, Unlimited Texts and 500MB of Internet on a 30 Day Rolling contract for £15pm inc VAT. The same deal is £20pm for 12 months on the web.
The sole trader business will cease trading the deay before the Limited company starts, buts as Nicola said, there would be no issue anyway.

Nicola J - Yeah thats the 1 I have read a few times and it is a little unclear. Does it make a difference if the company if mearly supplying the SIM not the phone? And how would you argue solely business use?

Thanks again for the replies!

[MyAccountantOnline]

Does it make a difference if the company if mearly supplying the SIM not the phone?


No because the contract is to provide the phone.

how would you argue solely business use?


By proving the itemised bills.

[Scootek]

I get 50% of my iPhone 4 contract for the life of the contract. I would not be eligible for that if I was on a business contract. Don' ask how I got that ;)

Secondly, I have been told it's not a good idea to run a sole trader and limited company side by side because the government gets suspicious about hiding income and not showing some income etc. However, I have to state I am NOT an accountant, so please follow the advise of the accounants. They are likely to be right.

[Williams lester]

Secondly, I have been told it's not a good idea to run a sole trader and limited company side by side because the government gets suspicious about hiding income and not showing some income etc. However, I have to state I am NOT an accountant, so please follow the advise of the accounants. They are likely to be right.

Whoever told you that is wrong. You are no more likely to be hiding income this way than if you were running two companies or two sole trader businesses!

[Scootek]

Whoever told you that is wrong. You are no more likely to be hiding income this way than if you were running two companies or two sole trader businesses!

Happy to be corrected. I was told this to be true about 4 years ago. As I said you gus "accountants" will know best.

[juststartingout]

yes regardless of usage assuming it is just a phone.

See the post in Blackberries here:


http://www.ukbusinessforums.co.uk/forums/showthread.php?t=164723

Could anyone answer my last question on this thread? It seems to have died :(

[Scott P]

this one seems to have died too!

If anyone has further input that would be great!

Thanks

[businessmobile]

Mobile phones, BlackBerries, etc., are excempt - they are not a benefit in kind for tax purposes:

'Computers and mobile phones loaned to employees by their employer may be exempt from the tax charge on the benefit in kind arising... There is currently no limit to the number of mobile phones that can be loaned and no financial limit'

hmrc.gov.uk/budget2006/bn30.htm

[businessmobile]

(you need to put www(dot) before hmrc because their website is not set up properly):

www
.
hmrc.gov.uk/budget2006/bn30.htm

(And I cannot yet post URLs here).

[David Griffiths]

(And I cannot yet post URLs here).

Just as well if you think that information from four years ago is still correct! ;)

[businessmobile]

Just as well if you think that information from four years ago is still correct! ;)

Very amusing :) four years is nothing for a UK law. The Distress Act (1267) still remains after almost 750 years!

[David Griffiths]

Very amusing :) four years is nothing for a UK law. The Distress Act (1267) still remains after almost 750 years!

All the damsels that I know will be suitablly relieved! :)

[billy buntin]

Billmccallum - I would say it would be very rare for us to exceed the price plan, and we were looking at £15pm contracts, just for the SIM Card.

Batra Ventures UK Limited - Yeah I read that too, but then a few accountants have told me that we need to make a contribution personally otherwise there would be a benefit in kind charge.

Nicola J - Thanks for that, it seems even clearer than the other guide I read. So we could transfer both our contracts into the Ltd company name, and then they would be classed as a business expense, regardless of the usage?

Thanks again everyone!

here is an exact answer, if the company owns the mobile and gives the use of it to an employee/director regardless of the private use, it does not need to be reported on the p11d form for personal tax. ps be careful if it is a blackberry as this can sometimes be classed as a hand held computer and may be treated differently.