We love expenses at Crunch, and you should too. They allow you to offset the cost of business essentials against your Corporation Tax bill, so you can save a little money while you spend it.
For many business expenses such as rent or broadband you are able to apportion cost to your business – for example if your broadband costs £30 per month and is used 50% of the time for business purposes, you can claim back £15.
For mobile phones, however, you can go one step further and put the whole contract in the name of your company. This enables you to get a little bit more tax relief through what is known as a “tax free benefit in kind.”
I’m intrigued, tell me more
Let’s say you’re a real Chatty Cathy and your annual phone bill (which is charged to you personally) is £1,000. If half of this is business use you can claim back £500 as a business expense. At the current rate of Corporation Tax (20%) this will reduce your tax bill by £100. Pretty good, but I’m sure we can do better.
If you take out a phone contract in the name of your business you will get Corporation Tax relief on the entire cost of your phone bill, so in the example above the entire balance of £1,000 would be an expense, knocking £200 off your Corporation Tax bill. The personal use included in the bill would be classed as a tax free benefit in kind, so you will not be taxed on it.
The one caveat with signing a phone contract in the name of your company is that you’ll probably have to use one of your phone provider’s business tariffs, which may prove slightly more expensive – but any increase in cost will probably be wiped out by tax savings.
How do I record this in Crunch?
Simple, just record the expense as you normally would, under the “Telephone” expense category. Hooray!