From Shipshape July 2017 | Uploaded 19th July 2017
Modern technology means that very few businesses can operate without mobile phones. Some businesses make use of their employees’ phones while others supply phones for business use. In both cases the cost of acquiring and using the phone will attract VAT, so the question is – can any of it be recovered?
If the phone belongs to an employee HMRC allows some VAT recovery in relation to business calls, subject to the normal partial exemption position of the business.
HMRC has not issued much guidance in relation to this type of situation but it’s possible that some evidence will be required to prove business use. The most obvious type of evidence is a phone bill, although HMRC does say that if the cost including VAT is less than £25 such evidence is not required. Nevertheless it makes sense to have a copy to hand.
HMRC has more detailed guidance when a mobile phone belongs to a business:
- Cost of acquiring phone – full VAT recovery
- Connection charges – full VAT recovery
- Call charges – apportion between business and private use and only claim the business element
- If the phone company provides the phone and the calls for a fixed monthly charge the total charge must be apportioned between business and private use and only the business VAT element can be claimed.
In all cases the amount of VAT that can be claimed is subject to the normal partial exemption position of the business.
Also, the bills must be addressed to the business. If they are addressed to an employee HMRC may treat the phone as though it is employee-owned.
HMRC has not issued specific guidance relating to smartphones, tablets, phablets or charges for data usage, so
the normal rules will apply. As a result it will be necessary to make an apportionment between business and private use and only claim the business VAT element.
When it comes to deciding on an apportionment method HMRC will accept any method that produces a fair and reasonable result such as an analysis of a sample of bills covering a reasonable period of time. Where laptops and computers are supplied to employees for business use HMRC will, normally, ignore incidental private usage.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to the above. If you would like advice or further information, please speak to your usual Shipleys contact.