The tax legislation contains a number of exemptions which allow benefits in kind to be provided to employees without a tax charge arising. Some of the exemptions are more useful than others. One of the more valuable ones is that for mobile telephones.
The exemption enables you to provide one mobile phone to an employee for their use. However, it only applies if there is no transfer of property – you must retain ownership of the phone. The exemption covers the provision of the phone for the employee’s use, plus the cost of private calls and data usage.
More than one phone
The exemption is limited to the provision of one phone per employee. If the employee is provided with second or further phones for private use, or if phones are provided to members of their family for private use, the additional phones represent a taxable benefit. The tax charge is calculated in accordance with the rules for making an asset available for an employee’s private use.
Business use exemption
If an employee is provided with a second phone for business use only, and the employee does not use that phone for private use, there will no tax charge in respect of that phone. Consequently, the employee can be provided with one phone for private use (or business and private use) and one phone for business use without a tax liability arising. However, if the employee is provided with two phones both of which can be used for business and private use, the exemption will only apply to one of them, whereas the other will be taxable. Thus, if the employee is to be given the use of two phones, it is beneficial from a tax perspective to restrict the use of one of them to business use only. Any incidental private use of a business-only phone is disregarded.
Beware salary sacrifice
Do not be tempted to use a salary sacrifice arrangement to provide an employee with the use of a mobile phone for private use as this will result in the exemption being lost. Instead, the employee will be taxed by reference to the amount of salary given up in exchange for the phone.