Most contractors need a telephone and broadband, either full time, if they work for the client from home or part time.
But you must ensure that contracts are set-up correctly or suitable provision is made to identify which is business and which is personal use, to avoid a tax change at the year end.
As with all expenses claimed, the two tests to be applied are:
- the expense must be wholly and exclusively incurred in the course of your trade
- if there is a duality of purpose, then only that part of the billing which relates to business use should be reclaimed
To keep things simple however, if your primarily use a mobile or broadband for business use, then get the contacts assigned to the company.
Landlines and mobile expenses
- If the phone contracts are in the companies name, then any minimal personal use wont be liable for tax.
- You can reclaim the cost of business call made on your personal home phone, but not a proportion of the line rental
- You must be able to separate out the business calls exactly, so for example if you get 1000 free minutes on a tariff then due to the duality of purpose you will not be able to make a claim for any of your business calls
- If you work from home some or part time and set-up a broadband line in your companies name, then this is an allowable expense, and there will be no tax charge for minimal personal use.
- If you have residential broadband and you start to do some work from home, then you must be able to clearly identify the time that was for business use in order to claim the proportion of the rental
- If your company pays the entire personal phone bill, then this is treated as a benefit in kind and will incur a personal tax charge, in addition the company will be liable for Class1a NI at 13.8