Company phone

What it means

A company phone is a mobile phone and plan that the employer provides for work. The cost of the device and work-related calls is a tax-deductible expense for the company. If the employee also uses it privately, however, the private part must be quantified and dealt with.

The employee can reimburse the private part, or it is taxed as a benefit in kind and subject to contributions. If private use is not addressed, the tax authority may disallow part of the company's costs.

An alternative is the BYOD model, in which employees use their own phones and the employer contributes towards the work share. Each model has different consequences for tax, security and device management, so it should be chosen deliberately and set out in an internal policy.

How it works in practice

The simplest approach is to determine the split between private and business use from itemised call and data records, or to agree a flat share backed by actual usage. The split is recorded in a policy or an agreement with the employee and reviewed regularly.

For VAT, a payer deducts the tax on company phone invoices in proportion to business use. If the employee pays for the private part, the employer may invoice it with VAT where appropriate; where private use is free, the VAT position must also be assessed.

The phone is a work tool holding company data. The policy should cover security, such as screen lock, encryption and passwords, remote wiping if lost, and what happens when the employee leaves, including returning the device and porting the number.

What to watch out for

Ignoring private use is a common mistake in small firms. In an audit, the tax authority may treat the entire cost as private or assess payroll tax on employees, which is more expensive than setting rules in time.

Accessing work data on the phone raises data protection issues. Any monitoring of the device by the employer must be proportionate and employees informed of it; it may not intrude on privacy more than necessary.