These days, you’d be hard-pushed to find a business which doesn’t rely on broadband to some degree – it’s a ubiquitous product which has changed the way many of us run our businesses. Here we consider the circumstances under which business broadband costs can be offset against your company’s tax bill.
Fundamentally, the tax treatment of your broadband package is determined by who is party to the contract – the individual (a residential contract), or the company (a business contract).
Business broadband contract
If your broadband contract is in your company’s name, this is an allowable expense for tax purposes.
If significant personal use of a business broadband service could be proven, you could in theory be liable to a benefit in kind charge against the employee (however unlikely that may be).
Residential broadband contract
If your broadband contract is a residential one, unless you can split the service to clearly demonstrate separate business and personal use, then you cannot reclaim the costs through your company.
As residential broadband services are typically flat-fee (or part of a wider package which may include TV and phone services, for example), it is hard to demonstrate to HMRC that the costs would not already be borne by the employee, regardless of any subsequent business use of the service, due to the ‘duality of purpose’ rules.
As stated in EIM01475; “If an employee who begins to work from home under homeworking arrangements is already paying for a broadband internet connection at home, there is no additional expense.”
However, if you have to upgrade your existing residential broadband service, or pay for new equipment for business reasons, then you could legitimately claim for the extra costs against your company.
As ever, you should ask your accountant if you have any questions relating to expense claims, as the rules are complex.