Flexible working: employee phone and internet costs

Communication in the workplace has changed and video conferencing, skype, lap tops and mobile phones have made flexible working the new normal. It isn’t at all unusual for employees to work from home using their existing personal phone and internet connections for business. So, is it possible for employers to reimburse them for any extra costs?

Unfortunately, as most phone and internet costs are bundled up in a single package, it can be difficult to identify precisely what these additional costs are. In this case a reimbursement, tax free wouldn’t be possible.

The most common situation is where employees have call inclusive phone or broadband contracts.

Let’s say an employee has a phone contract for £15 a month that includes 100 minutes of free calls.

In one month they make 90 minutes of calls. 50 minutes of those calls are used for business and 40 are personal.

What is the business cost?

In this example there is no additional cost because the employee will be paying £15 a month regardless, as long as they make fewer than 100 minutes of calls.

Therefore any reimbursement for the business calls, should be subject to PAYE and NIC via the payroll.

Contrast this with a month where perhaps 120 minutes of calls were made, so the employee had to pay an extra £5.

If those 20 extra minutes were business calls, and your employee could show this from their phone bill, the employer could reimburse the additional £5 free of tax and NIC.

The same principle goes for broadband costs, though clearly proving that any excess over the standard charge relates purely to business is going to be more difficult.

What happens though if the employer installs additional lines or facilities for business reasons, or the contract is between them and the service provider rather than the employee and the provider? In this case, the tax profile can be different. Please get in touch if you need help with this.

Finally, what about the increasing trend for employees to no longer have a dedicated landline at work but are provided with a mobile telephone to make/receive all their work calls? This will be tax and NIC free, (even if there is private use), provided the contract is between the employer and the phone provider.

To discuss how this may impact you and your business, please get in touch with me or another member of the employment solutions team on 0330 024 0888

Tessa Brown