The liability to pay a telephone bill falls on the subscriber. The appropriate tax treatment depends on who is the subscriber.
Where an employer applies for the provision of a telephone at
the home of an employee it is the employer who is the subscriber,
not the employee. The employer is the person who has to pay the
telephone rental and other charges.
In these circumstances the employer is not bearing a
financial liability of the employee and the amount paid is not
“earnings” within Section 62 ITEPA 2003 (see generally
EIM00520 onwards).
But, unless the employee is in lower paid employment, the
amount paid will be treated as earnings under the benefits code
(see
EIM21001 onwards). See
EIM21615 for circumstances where the
benefit may be exempt from tax.
Where the employee applies for the provision of the telephone
the employee is the subscriber. If the employer pays any of the
telephone expenses direct they will be meeting the pecuniary (that
is, financial) liability of the employee (see
EIM00580). The employee is treated as
receiving earnings within Section 62 ITEPA 2003 equal to the amount
of the bill paid direct by the employer.
Payments by employers that do no more than reimburse the
actual cost of outgoing business calls (excluding any part of the
rental) should be disregarded.
If the employer’s payment is treated as earnings within
Section 62 ITEPA 2003 the employee is entitled to a deduction under
Section 336 in respect of the cost of necessary business calls.
EIM32940 explains when a deduction may
also be due for the cost of the line rental.
If any employer or employee complains that undue significance
is being attached to the form rather than the substance of the
transactions you should point out that different ways of doing
things can produce different tax results.
If an employer has a number of employees who will be liable
to tax in respect of payments made to meet all or part of their
telephone expenses, you may negotiate a reasonable fixed amount
with the employer which can be treated as the measure of the charge
for all the employees concerned. But such an agreement is not
binding on the employees. Any of them can ask to be taxed on the
strict statutory basis if he or she so wishes.
