With mobile phone and data costs spiralling and businesses expecting their employees to be accessible for longer, where does business use stop and use for pleasure (texting friends, downloading content and facebooking) begin? It’s a fuzzy line and one no doubt requiring of a bit of give and take.
Companies that operate a zero tolerance approach to having their resources put to more personal use, may just find that when the shoe is on the other foot and they want their employees to go the extra mile, their own rhetoric comes back to bite them as employees follow what is stated in their contract rather than the spirit of the law.
With business mobile phone contracts however, comes financial accountability. It is illegal for businesses to claim back VAT for personal use of business assets, so where should the line be drawn?
According to HMRC there are a variety of methods you can employ. You can, for example, seek to put in place a zero tolerance on personal use, but that zero tolerance must be enforced and you must be able to demonstrate that it is being adhered to in some way, which means it has to be policed.
Another method is to analyse personal usage. A one off or infrequent exercise in which you profile employees to discover and model their habitual usage and then use that as a basis on which to claim back VAT. This can be a costly exercise, but as losing, replacing and re-training staff is also costly and business mobile phones are increasingly seen as a ‘must have’ perk it may still be a worthwhile.
A third option is so called ‘fair assessment’ where suitable guidelines are given to employees on mobile phone usage and VAT is not claimed back on the personal portion. Again this needs to be monitored and could perhaps be done in a series of random tests, evaluating bills to see if numbers that come up frequently are personal rather than business in nature.
Where companies fail to address this issue, it is important that they realise that serious penalties can result. HMRC is entitled to seek to reclaim VAT on personal mobile phone usage backdated for up to 3 years. Not only would the VAT itself be costly to repay, but the work involved in analysing data and going through past records could have a devastating impact.
Perhaps this is one for business to business mobile phone providers to address. Could they provide contracts or even extra lines and numbers for employees to use that are separate from the company’s bill? This type of solution would mean that people didn’t have to juggle between phones, but could assign either a ‘business’ or ‘personal’ tag to their list of contacts and have their calls billed and/or measured accordingly?
I’m sure this isn’t an original idea, but with the cost of VAT rising, perhaps more pressure needs to be put on the companies supplying the contracts to come up with innovative solutions in which both the company and the employee can benefit.