…How Can I Reduce Telephony Costs And Meet HMRC Regulations At The Same Time?
Read our guide below on how to control the cost of your organisation’s call costs and ensure compliance with current VAT regulations.
My company is VAT registered and has a large population of mobile phone users. What obligations does my company have in declaring personal use of these phones?
The obligation is that input tax claimed from your mobile bill must not include the VAT incurred by staff when making personal calls. The VAT guide says: “You cannot treat VAT incurred on purchases of goods and services as input tax unless you intend to use those goods or services for the purposes of your business”.
Whatever happens, you must have a method which is agreeable to HMRC.
Can’t we estimate how many calls are personal?
One of the methods of establishing a proportion of personal usage is by agreeing such a figure with HMRC. However, without the back-up of sound data this figure is often arbitrary and can result in a VAT bill far in excess of what is really due.
What happens if my company is unable to separate business and personal usage?
If you cannot show a method which is deemed ‘fair and reasonable’ a figure will be imposed by HMRC which can often represent a figure larger than is actually the case. This will mean you are unable to reclaim VAT on a larger proportion of your purchases than would otherwise be the case. In addition, previous tax periods may be assessed for discrepancies. At all times visiting VAT officers will check to ensure that the amount you treated as input tax is ‘fair and reasonable’.
Does this just apply to mobile phones?
This applies to any goods or services which are available for personal usage.
Is there any legislation to say how I apportion personal usage?
There is no single method of apportionment. However, how you work this out must be ‘fair and reasonable’. The key point here is that you must be able to justify how you have calculated this so sound data is critical!
What options are open to me as a VAT registered company, in determining personal usage on mobile phones?
The VAT Guide says: … ‘For example businesses could analyse a sample of bills taken over a reasonable period of time and use the same ratio for future VAT recovery on mobile phone bills.’ However, if your phone charges fluctuate over the year, you can often result in being unable to reclaim VAT on a larger figure than is really the case if actual usage was known.
If I choose a system to help me apportion personal usage, is there any likely return on my company’s investment in a call reporting system?
In practice, when a company announces that call reporting is being introduced and employees are provided with a list of their calls for each billing period personal calls usually reduce. By continuing this process the reduction is maintained. This will often return a saving in a company’s phone bill.
What happens if I don’t apportion personal usage of mobile phones?
Companies are understandably reluctant to advertise the fact that they have been fined by Her Majesty’s Revenue and Customs. However, the truth is that quite a few have suffered to the tune of millions of pounds, so it does make sense to establish your company’s method of determining this kind of usage.
Is this the same if our employees are charged for personal calls?
Whether you authorise your staff to make personal calls or require them to reimburse the company or not, you still need to be able to apportion personal usage.
What if my company does not permit personal usage?
Even if your company does not permit personal usage you must still have a way of showing adherence to your policy and be able to identify and report on any abuse.
Are there other ways of determining what personal usage is, for VAT purposes?
The critical point is to establish a method which is deemed ‘fair and reasonable’ for your company’s circumstances. One method offered by HMRC is to estimate your VAT input tax value on your company’s income. This method is rather arbitrary and means you may be claiming less VAT back than you are due.
The Solution – Damovo Web-Bill
How secure is my call record data?
The Damovo Web-Bill service is provided through an SSL and password protected web site with all data between the site and the user encrypted. Data is stored in accordance with Data Protection laws using only the minimal amount of personal data needed to provide the service.
How expensive is this solution?
This depends on the size of your organisation and the kind of telephony systems you have. However, costs can be as little as 10 pence per month per user. The more important question is “how much is it costing my company not to have this solution?”
What are my responsibilities to maintain and host the system?
Damovo Web-Bill is hosted and maintained for you. The way we use the technology means that very little of the charge we make for this service is for hosting and maintenance.
Are there any other benefits of using this solution?
Web-Bill is completely flexible and can be shaped to suit your business. If you have multiple service suppliers providing mobile and fixed line services, Web-Bill can consolidate this information into a single view and even split charges across your nominated cost centres. You can also report on IP telephony systems usage as well as email and internet access.
For more information or for advice please contact us at enquiry.uk@damovo.com