UK employees waste around £400m a year talking to friends and family on company mobile phones which are paid for by their employers, research has claimed.

This huge cost undermines the profitability of British businesses and puts them at risk of inadvertently breaking tax regulations, according to telecoms expense management firm Aurora Kendrick James.

The problem lies in mistakenly reclaiming VAT on the total mobile phone bill rather than reclaiming just the business element.

This simple error means that a potential £150,000 is being incorrectly claimed from the Exchequer every day.

Based on 10 years' analysis of telecoms spending and habits in the UK, Aurora Kendrick James believes that personal calls account for between 20 and 25 per cent of all calls made on company mobiles.

Jeremy Green, principle analyst at Ovum, said that the UK's three million corporate mobile phones generate an annual bill of some £1.7bn, putting the cost of personal calls at between £340m and £425m.