Company mobiles are tax-exempt
MM writes: We pay our employees a round sum each month for expenses, which
covers any business use of their personal mobile phones. Is this the best
way of reimbursing their expenses without incurring tax?
- The short answer is no, writes Jon Sutcliffe, partner at Kingston Smith LLP.
Employees can be reimbursed for business calls through an expenses claim, as
long as this is accompanied by supporting documentation - for example, a
copy of the phone bill.
If you continue to use round sums or make any reimbursement that covers line
rental or private calls, these should be paid through the payroll with
National Insurance and tax deducted at source.
There is an alternative. In most circumstances the provision of a mobile phone
is exempt from tax charges, even if it is used for private calls. The
contract and phone bill must be in the company’s name.
If two mobile phones are provided and each can be used for private calls, only
one will be exempt while the other will be treated as a taxable benefit.
The exemption may cover more than one mobile phone if they are provided for
business use and any private use is not significant. For example, this could
apply if an employee has to travel internationally and has more than one
mobile phone to take advantage of different tariffs in different countries,
but again the private use must not be significant.
In short, if you want to avoid a tax charge you will need to get employees to
analyse their mobile-phone bills, or the company must provide phones.
Give fair deal to temporary staff
CM writes: I am planning to recruit temporary workers over the Christmas
period. I want to take on five of them, and intend to make two permanent at
the end of the year. Is it correct that they do not have the same rights as
their permanent counterparts? Do I mention at the start that there is a
possibility they could become permanent members of the workforce or should I
wait and see how they do?
Like many other businesses, you have decided to plan early for the busy
festive season, writes Peter Done, managing director of Peninsula.
I presume you will be employing the five people on a fixed-term contract that
will expire at a set date. The general rule is that, except where an
employer can objectively justify his actions, fixed-term employees must not
be treated less favourably than permanent employees doing the same work. The
Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations
came into effect on October 1, 2002 and apply to most people on a fixed-term
contract.
The regulations give your fixed-term employees the right (except where the
alternative can be justified) to the same pay and conditions, the same
benefits package and access to a pension scheme. They are also entitled to
be informed about permanent job opportunities.
A fixed-term contract will normally end automatically once it has reached its
agreed end point, thereby bypassing the need for you to give notice. If the
contract you have given states that employment can be ended early, you are
still required to act fairly and follow the minimum required dismissal
procedure.
In regards to any permanent posts that may arise, it is your choice whether to
offer these to temporary workers. Any decision would, however, be best made
by following a transparent and fair recruitment process. This would also
ensure the successful candidate has been selected fairly and avoids
accidental discrimination on the grounds of sex, race, disability, sexual
orientation, religion, gender reassignment or age.
Kingston Smith LLP, the chartered accountant, and Peninsula, the
employment-law firm, can advise owner- managers on their problems.
Send questions to The Business Doctor, The Sunday Times, 1 Pennington
Street, London E98 1ST, or fax to 020 7782 5765. Advice is given without
legal responsibility.
bizdoc@kingstonsmith.co.uk
