Reimbursing Employee for phone bill

sarahwilson

MD of compny gets his phone bill paid at home by the firm in full (don't go there its a mahoosive can of worms!!) Basically the firm missed paying, his service got restricted so his wife paid it over the weekend on her debit card, he gave her the money to cover it and now he wants the money out of the firm.

I have no receipt to show this being paid, I know it has been but how do I get round the fact that the chq/cash is not going to be in BT's name but the MD's. I don;t really want to ask for his wifes bank statement to support the payment but I don't like the fact I don't have anything to support it, its only £82.00 am I being over fussy?

mary@adorable.co.uk

Phone Bill

Under an HMRC inspection, the inspector would ask to see a bill to support the payment. If none were available they could make an assessment of salary and look for PAYE and NIC to be paid over.

If this has been paid by the MD's wife the the MD should put in an exepnse claim form to obtain a reimbursement of the expenses, attaching a copy of the bill.

In order for the bill to be a valid business expense it must be 'wholly and exclusively for the purpose of the business'

If the business has a dispensation agreement in placce with HMRC which covers this type of expense there is no need to report it on a P11D, however if no dispensation is in place then P11D's must be completed for all employees earning in excess of £8,500 whom ahve had expenses reimbursed to them, or credit card holders in the business.

This is a minefield which carries heavy penalties if you get it deliberately wrong and it is een to be not managed within the rules.

Seek advice from your accountants if you are not sure.

Hope that helps!

Poodle

Whose name is actually on the phone bill ie who actually has the liability the company or the director?

In the short term, and to help you get out of a sticky siuation pay the director through his directors loan account, then process the bill as you would normally do through your accounts with an adjusting entry to cancel out the payment on the DLA. You do need him to sign something though in acknowledgement of the payment.

I agree somewhat with Mary but it does depend on who actually has the liability for the bill

If it is the Director then the telephone bill must be processed through payroll to enable Class 1 NI to be calculated as this is a pecuniary liability for the individual.

I would also add the word 'Necessarily' to the quote!

Poodle

payrollpro

Hi everyone,

The first thing we must always be straight with is that the rental part of a home telephone charge is always taxable and reportable. It can never be relieved no matter what the proportion of business charges is. Not only is this taxable it is NIC able at Class 1, not Class 1A so the rental has to be processed in payroll in the month in which the employer incurs the charge and then reported on P11D at year end.

The only thing which is excluded, and can be part of the dispensation, is any business calls which are supported by a log. I have been suceesful in arguing that at a certain level we cannot expect a log of all calls but this is not easy to do. Often HMRC will agree on a percentage but it can take a lot of haggling.

Sometimes the cost of arguing it out is greater than the tax which would be paid.

Even worse, in this case is the fact that the company generally pays the bill directly so it is not telephone charges as far as the P11D is concerned, its Section B, Payments made on behalf, still no Class 1A and therefore still Class 1.

Always a nightmare and I sympathise with the situation but there is a statutory duty to comply even if it is unpopular with the director.

Payrollpro