Mobile Phones and Utilities
The question of expenses can be intricate. Different types of expenses have particular taxation implications. In general, expenditure that is incurred wholly and exclusively for the purposes of business is allowable for Corporation Tax. These expenses are deducted from your company’s income and have the effect of reducing taxable profits, thereby reducing the overall amount of tax payable.
Although expenditure may be incurred by the business, there may be an element of benefit to you, the company director. This will have personal taxation implications as these items are considered by the Inland Revenue to be a Benefit in Kind.
Examples of Allowable Expenditure may include the following items.
If the mobile phone is owned by your company all costs paid by the company are allowable for corporation tax. VAT may also be claimed for VAT registered traders. If you use the telephone for any non-company calls, you will be charged income tax based on the standard benefit in kind. If your company is unable to enter into an agreement with the mobile phone company, and you either purchase the phone personally or act as a personal guarantee to cover the costs, we will assist you to file a board minute resolving that the company indemnify you for any expenses incurred.
We suggest that you consider installing a separate telephone line for business use. Business calls from your home phone are fully tax deductible but the line rental is not. As with other expenditure where there is duality of use, if your company reimburses your home phone bill, which includes an element of private use, a personal benefit in kind, to you the director will arise.
A reasonable proportion of the costs of running your office from home are allowable. What is reasonable will depend upon the facts. It is also important that no one room in your home is devoted exclusively to company business. If you find yourself continually working in one area make sure that is has personal items around such as your exercise bike or rowing machine or other items of a personal nature. Also a reasonable amount say 20% of your utility bills, like gas and electricity usage, will be allowable. But note that standing charges for utilities and for council tax are not allowable.