HMRC internal manual

National Insurance Manual

NIM06225 - Class 1 NICs: Expenses and allowances: Telephone expenses: Mobile telephones

Employer-provided mobile telephones

Where an employer provides an employee with a mobile telephone and enters into a service agreement with the telephone company in respect of the service costs and calls, all aspects of the provision (telephone, service and calls) are excluded from Class 1 NICs as a payment in kind by virtue of regulation 25 and paragraph 1 of Part II of Schedule 3 to the Social Security (Contributions) Regulations 2001 [formerly regulation 19(1)(d) of the Social Security (Contributions) Regulations 1979].

There will also be no liability for Class 1A NICs because the mobile phone itself, the line rental and the cost of private calls made on it are exempt from tax by virtue of section 319 ITEPA 2003. See NIM13000 for general guidance on the principles regarding Class 1A liability and EIM 21780, previously SE21780 for guidance regarding the tax exemption.

Liability in respect of employee owned mobile telephones

Class 1 NICs are due if the employer:

  • reimburses the employee the cost of the mobile telephone, service costs or the cost of private calls in connection with the employee’s own mobile telephone, or
  • provides the employee with a voucher for use in relation to the employee’s own mobile telephone or private calls made on it.

If the employer reimburses the cost of business calls made by an employee on their own mobile telephone the payment is allowable as a business expense just as it would be for business calls made on a land line (see NIM06200) but you must determine the cost of the business calls by considering the particular tariff appropriate to the employee’s mobile telephone. If the tariff includes free time - and business calls therefore do not involve the employee in any expense (see EIM 32951, previously SE32951 for an example) - then the cost of the calls cannot be excluded when calculating earnings for NICs purposes. This is because, in these circumstances, the requirements of paragraph 9 of Part VIII of Schedule 3 to the Social Security (Contributions) Regulations 2001 will not be satisfied as the employee will not have incurred any expense.

See NIM06195for guidance on business expenses in connection with telephones and NIM05020 for general guidance on business expenses.