Can you reclaim the cost of home broadband?
Yes you can – but there are restrictions as you would expect. The EIM01475 guidance from HMRC’s website is useful here.
Company contracts and pays for the broadband service
If a broadband contract is undertaken in the name of a limited company and the service is provided at the home of a Director or employee but paid for directly by the company, the monthly broadband cost is a tax deductible expense for the company for corporation tax purposes. If it is not possible to breakdown work and private usage, HMRC accept that providing any private use is insignificant there is no taxable benefit for the employee.
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.
Business use of a personal broadband service
HMRC guidance is quite clear under Section 316A ITEPA 2003. If there is already a broadband service in place at the Director’s (or employee’s) home, HMRC argue that there is no additional cost to you in using an existing broadband package for business use:
“If an employee who begins to work from home under homeworking arrangements (see EIM01472) and is already paying for a broadband internet connection at home, there is no additional expense. The employer cannot, therefore, reimburse the employee’s broadband internet charges, tax free, under Section 316A. Any such payment that the employer may decide to make should be subject to PAYE and NICs”.
However, if you already have a broadband account, in your own name, and it’s possible to split the business and personal use each month to show that you have incurred additional costs for business activities, you can reclaim the 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.
No Broadband Service exists at the home
If no broadband service exists at the Director’s home and broadband is required for them to carry out business activities from home, there is no taxable benefit to 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.”
The rules are less restrictive for the self employed and broadband expenses are allowable on a proportionate basis. Therefore, if there is a mixture of both business and private broadband use, only the business proportion is allowable for tax. To make a claim, you will need to work out the ratio of time spent using the broadband for business purposes compared to that for private use and claim the appropriate business percentage of the total costs.
Further information If you have any questions about what expenses you can claim in your business please give us a call on 01386 764741 or send us a message and we’ll be more than happy to help.