October 23, 2017

How to claim a new iPhone X against tax if you're self-employed

If you run your own business, there are all manner of expenses you can claim to reduce your tax bill.
That means you can effectively get a chunky discount on all sorts of things - even things you get personal use out of too. 

Follow the rules properly, and you could save on gadgets such as the new iPhone 8 and iPhone X, meals out, gym membership, holidays and in some cases childcare and school fees. 

Of course, there are certain hoops you will need to jump through to keep the taxman happy. And some of them are bigger obstacles than others so we've asked tax expert Jonathan Amponsah to take you through everything you need to know about 'allowable expenses'. 

Claiming for a smartphone

As a small business owner, if you're an employer and provide your staff with a mobile phone and the phone contract is between you and the supplier, then all costs can be claimed against tax - even if some of the calls are personal calls. 

There's no additional tax for you to pay. So if you are director of your own company, this applies to you.

But if you arrange the contract yourself and the company meets the costs, then while the costs can be claimed through the company, you will be deemed as receiving some benefits and you will incur some tax. So the advice is to get the company to arrange and pay for the costs.

If you run your business as a sole trader, then what you can do is to claim for a percentage of the costs that are business related. BUT if you have a second phone for personal calls, and the new iphone 8 or X is for business use only, then you can claim all the costs against your business.
Now here’s an interesting mobile phone expense claim that might surprise you. 

Claiming for a second iPhone? If you provide more than one phone to an employee (again limited company situation and the above two conditions are met), then the first phone will all be tax free but the second phone will count as an asset. 

What this means is that your company can claim all the costs and bills but you potentially have to pay for the benefit in kind tax. So let’s say the annual costs are £600 and you’re a basic rate taxpayer, you only pay £120 (20 per cent x 600) per year for that flashy second iPhone 10. 

Entertainment (food and drink)

This is an area of expenses that the tax authorities don’t allow you to claim against in general, but you can where you meet certain conditions.

Staff entertainment: You can claim £150 a year per head for entertainment. Even if it’s just yourself, as a director of a limited company, you can still claim this expense against your income because directors are classed as employees.

Contractual obligation: It can be part of your business to entertain, for example, you’re providing a training course to businesses. As part of the course you may provide tea, coffee, lunch. Even if you've just bought food to prepare, you’re still allowed to claim because you’re under a contractual obligation to provide it.

Quid pro quo: Say you’re a freelance writer and you want to pick the brains of an expert on a subject you’re writing about. You pay for a lunch in exchange for help with your research. Because the expert provides value but only has a meal in return, you can claim the expense.


Holidays are another expense most people don’t expect to be able to claim against. However, if done correctly, you can. Here are two common situations where such claims can be allowable. 

1) Mixing business with pleasure. If you’re on a business trip you may decide to go to the beach, without incurring additional cost. Because the original purpose of the trip was for business, you can still claim the whole amount through the company. Your time on the beach doesn’t matter. Why? Because there is no additional cost and it’s an incidental benefit of the main business purpose.

2) Extending a business trip: You have a business trip and decide to add an extra two days for sightseeing. The good news is the sightseeing doesn't cancel out the business need for the trip. As long as the primary purpose of the trip is business, you can still claim the majority of the costs against tax. So make sure to keep proper records, notes and also board minutes to document the primary reason for the trip.

The only amount you can’t claim against is the additional cost of staying the extra days (which you need to pay back to the company). 

And beware turning a holiday into a business trip. This is the only time where you absolutely cannot claim expenses against your income. The purpose of the trip is personal. If you then decide to do some business while you’re away, you’ve waived your right to claim any expenses.

HMRC allows you to claim against vouchers you give staff to exchange for holiday, if the cost is reported as a staff benefit. As a director, your company can pay for your holiday, report this as a benefit – then pay Class 1 National Insurance on the cost. 

You, as an employee pay tax on it. Then, the company can claim the cost of this benefit against its income.
School fees and gym membership  

In certain circumstances, if you run your business through a limited company rather than sole trader or partnership, school fees, care home fees, even golfing lessons – can be claimed as a business expense.

As a director of a limited company, you’re treated as an employee for tax purposes. So the company can provide you with benefits as part of your director’s remuneration. And it is these benefits that can include payment of school fees, golf lessons and care home fees. Find more information on this from HMRC, click here. 

Where the company pays for the care home fees, this will be classed as benefits in kind and the director will pay income tax on the benefit but not national insurance. 

In fact, getting the company to pay for care home fees is not a new idea and this was confirmed by both HMRC and the Courts in a recent 2016 tax case (Sarah Baylis v HMRC). So long as Benefit in Kind rules are followed and reported, this is not a contentious issue. The same goes for school fees and golf lessons.

Two further points to note. It’s very important that the contract is made between the company and the service provider (say the school or nursing home). It’s also important that board minutes are drawn up to mention that this is being done as part of the director’s remuneration. 

HMRC’s website has a helpful guide under their expenses and benefits section. If you’re not using a tax adviser or an accountant you’ll find it useful. 

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