Where you are the subscriber for a telephone in your employee's home, you will have entered into a contract with the provider for provision of the telephone service. This will cover both the line rental and calls.

If you pay the telephone bill and the telephone is used by the employee for private calls, there will be no liability for Class 1 NICs but there will normally be a liability for Class 1A NICs and tax (to be reported on form P11D). This is on the full cost to you of providing the telephone, because the employee has the benefit of the use of the telephone, which includes the cost of the rental and all the calls.

There is an exception to this rule where:

• the telephone is provided solely for business use and
• the employee uses the telephone for business and
• the employee makes no more than an insignificant amount of private use of the telephone, or repays to you the full cost of all private calls.

In this case no tax or Class 1A NICs will be due. Follow this link to equipment or services at the employee's home for more information.

Where the employee uses the telephone for both private and business use, the employee may set the cost of business calls against his or her income. However, this does not alter your obligation to report the full cost on form P11D and pay Class 1A NICs accordingly. For more information about Class 1A NICs look at NIM15550.

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