In Customs & Excise's new guidelines, businesses can recover VAT on the acquisition of a mobile phone and on standing charges for line rentals provided these don't contain any element for calls. Businesses can also recover all the VAT on call charges if they do not allow staff to make any private calls. 'However, we realise that businesses with such a policy often tolerate a small amount of private calls,' said Customs. 'We are prepared to treat such minimal use as being insignificant for VAT purposes and it will not prevent a business treating all the tax it incurs on calls as input tax.'
Businesses that charge employees for private calls can recover VAT on the cost of the calls but must then account for VAT on the amounts they charge staff. But companies that allow employees to make private calls without charge must then apportion the VAT incurred on call charges between business and private use, and can only recover the business element.