A new ltd company client is paying for his mobile from the ltd company account. It is mainly used for work but being a new company couldn't get the cobtarct in the businesses name. Having done some reasearch I am a bit confused how to treat it. Do I need to put it through with payroll? Or does it just need to be reported on the p11d?
If it goes through payroll do I just add the previous months bill to his monthly pay?
Thanks
Was it really a case that they couldn't get a mobile through the company (even with personal guarantee?) or that they realised that mobiles in the company name are more expensive and wanted the best of all worlds?
The phone, if through the business even where there is substantial private use does not give rise to a taxable benefit. (see http://www.hmrc.gov.uk/manuals/eimanual/EIM21779.htm)
If in the directors own name and reimbursed then only business calls are an allowable expense and everything else is a benefit.
If in the directors own name and its a package deal with the minutes inclusive (as most contracts are) then the director can claim nothing.
If as I suspect the director chose to take the contract in their own name rather than personally guaranteeing the contract in the business name then they will probably now be kicking themselves...Although, a call needs to be made between the tax benefit of payment under a more expensive business tariff and a personal deal through taxed income which may leave the taxpayer better off in real terms than having a business phone.
They cannot now create a hybrid of the cheaper personal tariff's and the tax benefit of running the phone through the business.
As a side note, I'm not surprised that you are confused.
I did a quick search in trying to find the right EIM above and unfortunately came accross the advice being given out on another UK Business forum... My god is that advice dangerously incorrect!!!! Not going to name fingers or point names at any poster over there but what stunned me was that nobody disagreed with the incorrect advice.
As a rule of thumb if you are looking for guidance on a subject look on Accountingweb, Taxation.co.uk, Taxationweb and (not trying to blow our own trumpet but) here first. Then at HMRC (as they phase things how they want the law to be rather than how it is).
Of the others there is a lot of advice from chartered and chartered certified firms on their own websites which is useful but always take accountants debating tax points over one accountant making a statement.
Many of the others sites though will just leave you confused and tied up in knots as you will end up seeing their words and thinking that there must be something in them as nobody has disagreed with them. In fact, I've just seen it where others took up the dangerously incorrect advice and expanded upon it!
At least if I say something here which is a complete balls up (thankfully doesn't happen too often!) I know that someone will correct me (which I have no issue with). My impression over on that other forum was that everyone was trying to be way too polite to contradict a poster.
Sorry, went off on one and well away from the original question.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
thanks for the reply. I have no definite knowledge of why the phone is isn't the business name although I suspect that when they went to get the contract it all seemed to difficult to get it in the business name so they took what seemed otbe the path of least resistance.
Have been looking in to this further and at the bookkeepers conference yesterday asked lots of others and the answer everyone gave me was that they just put it on the P11d which seems wrong to me and they were very surprised I was questioning it. But having read what HMRC guidance I could find they all they it should be pay-rolled.
I did manage to catch one one of the key note speakers (an accountant giving a talk on allowable expenses) and he said that the correct way was P11d for the tax and Payroll for the NI. Had a quick look on Taxationweb (thanks for the links BTW) and it concurs with this. I will advise client that his is what I am going to do, will obvisouly increase his NI bill etc
No problem going off topic, I agree it is dangerous following debate rather than statements of fact which is why I was glad I had the conversation yesterday
