Our experts at DSR Tax Claims know how hard it is to find good, quality information about HMRC’s tax regulations that is easy to understand, and that’s why we have created these handy guides to tell you everything you need to know. Our aim is to make life easier for our clients and that is why we want to share our expertise with you. You can also call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.
What happens if you pay your employees’ home phone costs?
There are a number of valid business reasons why you might be picking up the expense of your employees’ home phone bill – after all, you might need to be able to contact them at all hours for business purposes. These expenses might include the phone line rental, and call charges for their private calls as well as any business-related call charges. If you do pay for these expenses, you might be expected to report this to HMRC as well as pay additional tax and National Insurance.
Are there any exemptions?
If the phone is only used for business purposes and no personal use takes place, there is nothing to repot to HMRC and you don’t need to pay any additional PAYE or National Insurance. However, if you pay these costs as part of a salary sacrifice scheme, you will need to report this to HMRC.
What do you need to report and pay?
If the phone charges aren’t covered by the above exemptions, you need to report them to HMRC and as a result, you may have to deduct and pay more PAYE and National Insurance depending on the circumstances in which you pay for the phone expenses.
Those phone charges that are covered by exemptions (or what used to be known as dispensations) don’t need to be reported in your end-of-year reports to HMRC.
If you arrange for the phone and pay the costs
You need to report this expense on your P11D and you will have to pay Class 1A National Insurance on the cost.
If your employee arranges the phone contract but you pay the supplier
You need to report this expense on your P11D form and you will pay Class 1 National Insurance through your payroll.
If your employee arranges the phone contract and pays for it and you reimburse them later
As far as HMRC is concerned, this counts as extra earnings to your employee so you need to add the amount you reimburse them for the phone costs to their other earnings and then deduct and pay PAYE tax and Class 1 National Insurance through your payroll, just as you do for their ordinary earnings.
How do you work out the value to report?
How you work out the value of the expense to report to HMRC all depends on who arranges the phone line in the first instance.
If it is arranged by you, the value as far as reporting to HMRC and deducting National Insurance is the total cost of the line rental and all phone charges – business calls and personal calls alike. If your employee arranges the phone contract but you are responsible for paying the supplier, you report the cost of the phone line rental plus all call charges (business and personal) but you will only pay National Insurance on the cost of the line rental and private call charges as business calls are exempt.
If the phone costs form part of a salary sacrifice agreement, and the salary amount given up is greater than the cost of the phone expenses, you need to report the salary amount to HMRC. This only applies to salary sacrifice agreements made after 6th April 2017.
How can DSR Tax Claims help?
We aim to make life as simple as possible for our clients and that includes giving you the information you need to make your taxes (and your life) simpler and less stressful. Our team of experts at DSR Tax Claims are always on hand to help our clients and our excellent standing with HMRC means that we can make sure you don’t fall foul of their regulations, while claiming your maximum tax relief. We can even take care of all that paperwork and deal with HMRC on your behalf too. Call our friendly team on 0330 122 9972 – we’re the tax experts you can trust.