Mobile phone

Mobile phones are a popular and common benefit for employees as, provided the relevant conditions are met, even with unlimited private use the phone can still be provided tax-free.  

The main conditions are that:

• the employer is providing only one SIM card and/or phone with private use per employee;
• the contract for the card or phone is in the employer’s name; and
• the phone is not provided as part of a salary sacrifice arrangement.

The definition of a mobile phone is something primarily designed for making/receiving calls, so while the ubiquitous smart phone is included in the exemption, tablets, ipads or laptops are not even if they can make and receive calls. 

Mobile phones which are purely provided for business can also be provided tax-free. The key requirement is that where an employer provides more than one phone, to be within the terms of the exemption only one can have private use. So where an employee has multiple phones, it is important that private use is restricted to one phone and all the other phones provided are used exclusively for business purposes. If an employee was provided with two phones and both had private use, both would be treated as a benefit in kind. 

If an employee would prefer to use their own phone, an employer can reimburse costs of itemised business calls over the monthly tariff tax-free, but any further payments above those costs would create tax issues for both the employee and employer. Given many tariffs now include unlimited free calls, it may mean no claim for calls is possible from the employee.  

Mileage allowances for employees using their own car 

Where an employee does business miles in their own car then they can be reimbursed tax-free using HMRC approved mileage rates. These are currently 45p/mile for the first 10,000 miles and 25p/mile thereafter for a car. There are separate rates for motorbikes and bicycles. 

These statutory rates have not been updated in over a decade, so some employees may feel the rates do not reflect current motoring costs. However, even if an employer is prepared to pay more than 45p/mile, the employee will have to pay income tax and NIC on the extra amounts over the approved rates. The employer too will have NIC costs on the excess. Paying above the current limits, even with the best intentions, will therefore create benefit in kind and tax costs for both the employee and the employer - as well as significant extra administration.  

Home working allowance

If you have staff who work from home for some or all of the week then it is possible to pay them a simple, flat rate payment of £6/week or £26/month without creating a tax liability. This is intended to cover the employee’s additional costs of working from home. 

To qualify for the payment, employees must be working regularly from home under a homeworking arrangement with their employee – taking work home in the evenings from time to time on an informal basis is not sufficient. 

The advantage of this flat rate approach is it is simple and there is no need for employees to keep records of the extra costs incurred from working at home.  

Staff training 

Finally, any training paid for by the employer which is reasonably likely to be needed in a current or future role does not count as a benefit in kind.  

Employers can also pay for additional costs such as travel, childcare and exams incurred as part of the training without creating a tax cost for their staff.  

This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.   

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