Should you be mixing business and pleasure? smart guide to the costs and risks of allowing business and personal calls on one phone

Transcription

1 Should you be mixing business and pleasure? smart guide to the costs and risks of allowing business and personal calls on one phone

2 Contents smart summary 3 COPE strategies: The tax position 4 COPE strategies: Current expenses options 5 BYOD strategies: The tax position 7 BYOD strategies: Current expenses options 8 A third option: smartnumbers mobile 10 Conclusion 11 Find out more 12 Should you be mixing business and pleasure? 2

3 smart summary It is an inevitable fact that work is no longer something we only do in the office. Increasingly, workers choose the time and place they work, relying on modern communication tools such as tablets and mobile phones. This is generally considered to be a good thing, as flexible working is seen as aiding corporate productivity and worker efficiency. In addition, it has the potential to improve customer service and enhance employee satisfaction and empowerment. However, what is good for the business can be a headache for the finance department. Specifically, how do you separate business and personal mobile phone expenses when a worker uses one device for everything? This issue is particularly tricky when it comes to phone calls since, unlike s voice usage is not easily identified as work or personal. This means the proportion of business and personal use has to be carefully measured to make sure neither the employer nor the employee is falling foul of tax rules. Typical issues associated with mobile use in a corporate setting include: What rules and governance do you put in place to control the use of text, and voice on corporate mobile phones? What are the usability and corporate tax implications of using business mobiles for personal calls? What governance do you have to manage claims for business use of personal phones? How to go about overcoming these challenges is largely dependent on who owns the phone. Two modes of use and ownership are currently in vogue; bring your own device (BYOD), where the worker owns the phone, and corporate-owned personally-enabled (COPE), where the mobile belongs to the business. Ways to get around the billing challenges for both of these approaches have been developed, but in practice they may be inaccurate, open to abuse and/or cumbersome from an administrative point of view. This smart guide explores the challenges and reviews the options open to financial directors depending on whether the business has a BYOD or COPE policy. We also introduce a new option, called smartnumbers mobile, that offers additional benefits. Should you be mixing business and pleasure? 3

4 COPE strategies: The tax position The tax implications of business mobiles has been greatly clarified in recent years. For example, since 2002 UK businesses have been able to claim the cost of mobile phone provision as a tax-deductible expense when calculating corporation tax (although this assumes the mobile is used only for business). In December 2014, the VAT Notice 700 from Her Majesty s Revenue & Customs (HMRC) further stated that it would be possible to claim the VAT for the cost of a business mobile and the monthly network subscription fee. When it comes to the VAT on calls, however, the company can only claim back amounts that specifically relate to business use. Hence if a worker makes personal calls on their business mobile, these have to be separated out or the company could be in breach of tax rules. Furthermore, if the corporate mobile calling plan includes a given number of call minutes, the company can only claim back a percentage of VAT proportionate to the amount of business calls. This can be hard to manage in practice. The issue for corporations is how to apportion business and personal use in a way that is accurate, legitimate and simple to administer. Should you be mixing business and pleasure? 4

5 COPE strategies: Current expenses options If your business issues mobile phones to workers then the main expense options open to you are as follows: Lock down the phone for business calls only A no personal calls policy will make administration simple, since you do not have to separate out non-business use. In practice, however, this policy is likely to pose more problems than it solves, because: It is hard to see how workers could be obliged to comply with the system, unless you introduce penalties and intrusive checks. Workers would be forced to carry a separate phone for personal use, which is cumbersome and inefficient. It would damage morale for employees who perceive a work mobile as a perk. In summary, such a policy seems a poor fit to today s liberal workplace ethic and would likely lead to significant staff dissatisfaction, let alone problems in recruiting and retaining millennials and other employee groups. Account for personal use based on a profile This method relies on building a mobile use profile for each employee and then using that as a baseline for personal and business call allocations going forward. Although simple to apply, this suffers from the following shortfalls: What constitutes an adequate baseline period is open to interpretation and processing the numbers still requires effort. Estimates are prone to errors as they are only illustrative. Call usage patterns vary over time, so the business may end up subsidising personal calls or over-claiming VAT. In essence, this approach might be suitable for a small business but is unlikely to be suitable for a large corporation where the magnitude of errors could be greater. Should you be mixing business and pleasure? 5

6 COPE strategies: Current expenses options Identify personal calls Given that the business gets all the bills relating to mobile use, it is a relatively straightforward task to get users to identify their personal calls. Although widespread, this approach has several major drawbacks: Self-declaration is susceptible to both malicious and unintentional underreporting of personal use. It is a time-consuming process for employees, and thus one that is likely to be done late or badly. Even when streamlined through an online platform, it is complicated for the business to process and to monitor. This last point is a critical one for corporations. The billing software provider Aurora Kendrick James estimates that processing the bills from 1,000 mobiles costs as much as hiring a full-time employee, at around 25,000 a year or 25 per subscriber. Smartphone apps for personal calls A number of smartphone apps now offer the promise of giving users two phone numbers on a single device. In theory this sounds ideal; employees can use a special dialler for personal calls and the connection is routed over Wi-Fi or mobile data network. In practice, however: The services are not always reliable; users report problems such as poor call reception, software bugs, poor user interfaces and lack of functionality. The virtual phone software is not always compatible with smartphones running different operating systems. Technical support may be patchy, particularly from developers with limited market presence. These glitches provide a poor user experience so will lead to disgruntled staff. Should you be mixing business and pleasure? 6

7 BYOD strategies: The tax position An alternative to COPE is to give employees free reign to use their own devices at work. BYOD is very popular at present because it offers several advantages to the business. Recent developments in the consumer mobile device industry means employees often have better handsets than those provided by their employer, so BYOD can help improve employee satisfaction (and, indeed, is often driven by staff). Fiscally, BYOD is attractive because it allows the enterprise to avoid costs such as device purchasing, maintenance and insurance. But who pays for business calls on personal phones? Employees should legitimately be able to claim back business calls carried out on their own devices. For businesses, meanwhile, such expenses are tax deductible. As with COPE, however, it is not always easy for employers to apportion business and personal use in a way that is correct, reliable and easy. Should you be mixing business and pleasure? 7

8 BYOD strategies: Current expenses options The four main options for tracking business phone call expenses in a BYOD setting are as follows: Submit expense claims for business calls This has similar disadvantages to the identification of personal calls in a COPE environment, although if anything, the situation is even worse from a corporate point of view. For example: The system is open to abuse. In the early days of BYOD, employees would submit expenses claims for their entire family s calling plans, or contracts with outsize data use or roaming charges. The process is time-consuming for the employee and the employer. A further disadvantage is that companies may end up paying more for phone calls because personal users do not have access to volume calling plans available to enterprise. The analyst firm Ovum calculates it can be up to five times more expensive to carry out the same activities on a personal phone than on a business handset. Provide a fixed level of reimbursement to cover work calls Many organisations supplement an employee s salary with a set amount to cover business calls. However, this method is unlikely to work because: It could lead to accusations of discrimination if different levels are agreed between one employee (or group of employees) and another. Employees could feel disgruntled if the amount agreed fails to match their expectations or perceptions of business activity. It may bear little or not relation to actual amounts spent, leaving either the business or the employee out of pocket. As with profile-based reimbursement above, this technique is probably best suited to smaller companies where there is a high degree of trust between bosses and employees. Should you be mixing business and pleasure? 8

9 BYOD strategies: Current expenses options Have two numbers on one mobile Having two numbers on a single device would seem like an elegant solution to the problem of separating business and personal calls on one handset. One option is the use of dual-sim devices and use one number for business calls. Here the issues may be: Dual-SIM mobile phones are not usually designed for separating business and personal calls, but for operating on different mobile networks. In any case, requiring dual-sim mobile phones somewhat defeats the bring-what-you-want purpose of a BYOD strategy. Another solution would be to provide a second mobile number using one SIM, often referred to as virtual SIM. Use one number for personal calls and the other for business calls. Therefore, business use is automatically sent to the company for payment. The challenge is that many virtual SIM services rely on both numbers running on the same network providers, limiting employee choice. Offer a Voice over IP (VoIP) alternative A variation on the virtual number concept is the use of VoIP services from established telephony vendors such as Avaya or Cisco. These companies provide diallers that can be installed on BYOD smartphones as a way to separate business calls. However: VoIP requires a good data connection, which means important business calls may be lost or interrupted while in progress. There can be hidden costs. For example, additional telephone lines, to carry the additional mobile traffic and additional licenses for the corporate telephone system to record mobile calls. This approach is often taken by those organisations that already have the latest telephone systems, but in practice the quality remains below a threshold that might be deemed acceptable for many business situations. Should you be mixing business and pleasure? 9

10 A third option: smartnumbers mobile There is now an alternative to the approaches outlined above. With smartnumbers mobile you get two GSM mobile numbers on the same device, provided by an enterprise-class voice carrier and delivered via the cloud. This means you can install a business number on an employee s personal phone, enabled by an app. You own the number, they own the phone. You get one bill for business calls and the employee gets another for their personal usage. smartnumbers mobile makes it simple to manage your business and personal communications on one mobile, giving your business benefits such as being able to: Own the mobile number, so can continue business as usual when employees leave. Remove the burden of processing expenses with complicated tax rules. Provide a mobile number, not a company mobile. Using smartnumbers mobile helps your finance function by minimising your tax risk, demonstrating to HMRC (and your employees) that you are apportioning business and personal phone use correctly, and cutting your administration overhead. Should you be mixing business and pleasure? 10

11 Conclusion It is understandable that staff want to use one mobile rather than carrying two separate phones. Separating the payments of business and personal calls has tax implications as well as usability and administration issues. A comparison between the approaches to solve this is illustrated below. While many of the approaches solve aspects of the separation challenge, there hasn t been a solution that solves the whole problem until now. smartnumbers mobile automatically separates business use of personal mobiles without the burden of processing expense claims. smartnumbers mobile ensures that business use is correctly accounted for while removing the risk of overpaying for personal use. Furthermore, the intuitive user experience ensures that smartnumbers mobile meets the expectations of a mobile workforce. Comparison of approaches for COPE Separating personal calls from business owned mobile phones Feature smartnumbers mobile Business calls only Profiling personal use Online declaration of personal calls VOIP Ensure that the business doesn t pay for personal calls Yes Yes No No Yes Meets employee satisfaction Yes No Potentially No No Can make business and personal calls on the same device Yes No Yes Yes Yes Business and personal calls are automatically separated Yes Yes No No Yes Business calls using an enterprise-class mobile tariff Yes Yes Yes Yes N/A Technical solution widely available in the UK Yes Yes Yes Yes Yes Business and personal mobile numbers can be on different mobile networks Yes N/A No No N/A Reliable mobile call quality using GSM mobile technology Yes Yes Yes Yes No Comparison of approaches for BYOD Funding business calls on personally owned mobile phones Feature smartnumbers mobile Submitting expense reports Fixed re-imbursement Dual-SIM VOIP Ensure that the business doesn't pay for personal calls Yes No No Yes Yes Meets employee satisfaction Yes No Potentially No No Can make business and personal calls on the same device Yes Yes Yes Yes Yes Business and personal calls are automatically separated Yes No No Yes Yes Business calls using an enterprise-class mobile tariff Yes No n/a Yes N/A Technical solution widely available in the UK Yes Yes Yes No Yes Business and personal mobile numbers can be on different mobile networks Yes No No Yes No Reliable mobile call quality using GSM mobile technology Yes Yes Yes Yes No Should you be mixing business and pleasure? 11

12 About Resilient This smart guide was created by Resilient, the company behind smartnumbers, a range of communications services that deliver mobility, continuity and compliance to public and private sector organisations. smartnumbers are trusted by 7 of the top 10 global investment banks, 50% of the UK s blue light services, and over 40,000 Ministry of Defence personnel. The services are available directly from Resilient and also from BT. This smart guide is not intended to be a source of legal advice, and should not be relied on as such. Phone or visit trusted communications mobility continuity compliance