Mobile phones are an integral part of running a business in the UK. In fact, almost all small business owners and employees are using mobile devices to stay productive on the go. 

But is it possible for you to claim tax relief on the expenses associated with your mobile device? 

Read this guide and we will help you learn more about it. 

What Counts As A Business Expense?

For any business expense to qualify as tax deductible, it must be incurred “wholly and exclusively” for business purposes. 

This means the expense should be essential and proportional to enable you to run your company. Business phone expenses meet this requirement as telecommunications are a basic necessity for modern enterprises.

Types of Tax Deductible Mobile Costs

There are several mobile-related costs that qualify as permissible deductions:

• Monthly network subscription fees for work phones used by directors, employees or contractors. This includes voice calls, texts and mobile data.
• One-time purchase costs for handsets and other mobile equipment needed for business activities.
• Accessories like headsets and power banks for business mobiles.
• Roaming or international call charges incurred while travelling abroad for work.
• Mobile insurance to protect devices used for business tasks.
• Repair and maintenance expenses if the phone is predominantly used as a work tool rather than personal device.

How To Apportion Personal vs Business Use

To claim tax relief, you must be able to show that your phone is mainly used for business, rather than private, purposes. HMRC may ask you to provide call logs or device screenshots as proof if you are investigated.

If the phone has mixed business and personal usage, you should apportion costs based on the percentage of time it is used for work. 

For example, if 30% of your monthly allowance is consumed by recruiting activities, client calls and other business use, then you may deduct 30% of the line rental and data charges.

Many providers allow multiple SIM cards or numbers on the same account. In this case, HMRC is more likely to allow full deduction of the “business identity” subscription.

Contract vs PAYG Deductions

If your business pays upfront for a contracted handset and monthly airtime bundle, the costs can be spread over the lifetime of the contract term. 

So if you signed a 2-year iPhone deal for your Managing Director worth £50 a month, the full £1,200 expense could be deducted over 2 years at £50 per month.

For PAYG deals without a handset, the deduction would match your actual monthly top-up expenditure. Keep purchase records and call history to show this clearly.

Supporting Documentation

To successfully claim tax relief on mobiles, you must retain the following records in case HMRC investigates:

• Itemised phone bills showing call volumes and data usage.
• Purchase invoices for handsets, accessories or repairs.
• Minutes, emails or file notes documenting key work-related calls.
• Policy document if insured for business use.
• Diary entries or timesheets confirming days used for work.

Without evidence that your mobile activity is mostly business-related, HMRC may deny part or all phone deductions.

Special Rules for Company Directors

Company directors pose a specific scenario for HMRC. BusinessMobiles noted that if you own a company mobile but mainly use it for personal reasons instead of managing the business, related costs become a taxable Benefit-in-Kind (BiK).

To avoid BiK charges, directors should ideally have clearly separate personal and business phones and contracts. Any personal use of company mobiles should be charged back by the business or treated as a taxable employee expense.

Maximum Deduction Allowances

HMRC does not impose a specific monetary limit for the amount of mobile expenses you can deduct per year. However, phone costs must seem “reasonable” for your business operations and revenue size or they may be capped during self-assessment or investigation.

What Does Not Qualify for Tax Relief?

While most legitimate business mobile costs can offset taxable income, there are certain exceptions. Expenses HMRC will reject include:

• Handset upgrades purely for vanity rather than necessity.
• Premium accessories adding no functionality.
• Mobile bills paid by employees who later expense the business.
• Personal phone contracts used incidentally for work.
• International roaming not for a valid business purpose.

So be sensible when deducting mobile costs. Focus on plain voice, text and data plans that enable genuine day-to-day business activities for your workforce.

Maximising Deductions With A Telecoms Audit

With telecoms one of the top three expenses for most SMEs, it makes sense to optimise your mobile spending. Professional telcos like BillMonitor offer complimentary telecom audits for startups and small businesses.

BillMonitor’s experts will forensically analyse your bills and usage to identify savings on unnecessary subscriptions, inefficient tariffs and wasteful behavior. 

Typically, SMBs can reduce mobile bills by 15-30% per annum via smarter policies, contract negotiating and provider switching. These savings naturally increase the percentage you can claim in tax deductions too.

Using Mobile Plans to Stay Tax Compliant

Your mobile phone can actually help keep your small business tax compliant in several ways:

1. Use the calendar and reminders app to set alerts for key HMRC deadlines like corporation tax filings or VAT returns. This avoids any penalties from late submissions.
2. Download a miles tracker app if you deduct mileage for business travel by car. This provides an accurate log for claiming tax reliefs.
3. Take photos of important receipts and documents and store them in cloud storage linked to your phone. This creates digital copies if needed for future tax audits.
4. Install secure accounting software on your device to easily capture deductible expenses like phone bills while on the go. Sync these to your bookkeeping system.
5. Set up custom alerts for e-commerce apps to notify you of new orders or customer inquiries so you can respond promptly and provide quality service.

So, your mobile provides the tools to run an organized, tax efficient small business – and claim reliefs on its own costs at the same time.

Final Words 

Mobile connectivity is a must for successful modern SMEs. So stay productive on the go, while claiming tax relief on your essential business phone bills. Just follow HMRC rules by retaining clear records that separate commercial and personal usage. Get in touch if you need help apportioning costs or demonstrating valid deductions.

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