In the latest of our series on limited company expenses, we look at the tax treatment of broadband installed at home.
Broadband contract in the company’s name
Derek Kelly, MD of ClearSky Accounting, explains that the broadband contract needs to be in the name of the contractor’s limited company for it to be tax deductible and not attract taxation on the individual:
If the broadband connection is paid for by the company and is provided at the employees/directors home then, a full deduction for the cost is allowed when calculating the corporation tax due for the year.
Provided that any personal use of that connection is ‘insignificant’, no benefit in kind issues arise for the individual.
However, if the broadband connection is used for a mixture of business and personal use then a benefit in kind will apply with the full amount paid by the company becoming taxable on the individual.
If the employee does not already pay for a broadband internet connection at home, and needs one in order to work from home under homeworking arrangements, the broadband fee is an additional household expense that the employer can reimburse, tax free, under Section 316A.
However, if you already have a broadband account in your own name and it is not possible to split the business and personal use each month, the company cannot reimburse part of the cost.
This is known as a ‘duality of purpose’.
HMRC argue that using an existing broadband package for subsequent business use does not incur an additional cost.
You can only reclaim a proportion of personal expenses against your company if you can prove that they have been incurred wholly, exclusively and necessarily in the course of your business activities.
This is similar to the tax treatment of business calls made on an all-inclusive personal mobile phone contract.
Further information
You can view HMRC’s take on internet access in the employee’s home in EIM21617
As ever, always consult your accountant if you have any questions about expense claims or your accounts.
