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HMRC internal manual

VAT Input Tax

HM Revenue & Customs
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Specific issues: mobile phones

Some employers let their employees have mobile phones so that they can stay in contact with them for business reasons. Some employers allow their employees to make private calls on the phones and the employer pays for those calls. Other employers have a policy which does not allow an employee to make private use of the mobile phone.

In all cases any spending on line rental for mobile phones is seen as being incurred for business purposes. The VAT on this part of the phone bill is input tax. There should be no charge to output tax under the Supply of Services Order.

The tax incurred on the calls is input tax if the employer has a policy which says that private use is not allowed. There is no charge to output tax under the Supply of Services Order.

If private use is allowed you should decide whether:

  • the amount of private use; and
  • the tax on the call element of the bill

mean you should apportion the tax on the cost.

The way of working out the apportionment should be kept simple. It should not put any substantial burden on the business to keep supporting records. It should also be simple for HMRC to check how the apportionment has been worked out. A straight percentage apportionment based on a representative sample is likely to be acceptable.

If there is enough private use to make the phone a private phone for all practical purposes then the tax on the private calls is not input tax. VAT cannot be claimed on private expenses. It is not our policy to apply the Supply of Services Order in the case of mobile phones.

In principle there might be an output tax charge because of private use by the employee. However, because such private use is incidental to the business use, no such charge will arise.