You may be travelling to see clients. Having meetings in cafes, grabbing a sandwich whilst you’re out on the road.
Often this is all presumed to be a tax-deductible expense, but this is not always the case.
Let’s strip away some of the shades of grey and clarify what you can and can’t get tax relief on.
When you can’t claim
HMRC’s view is it that “everyone must eat in order to live and such costs are normal costs of living incurred by all and not incurred for the purpose of trading”. This means that you derive some personal benefit from eating and drinking, and you are not just eating to do your job.
If you decide to work from a local Cafe and have a drink and some food it would not be allowable. Or if you are working from home and order in food as you don’t have time to cook it would also not be allowable. These examples would not be deemed to be “wholly and exclusively” for the purpose of the trade.
When you can claim
“Subsistence” is the term HMRC gives to any food and drink expenses that arise out of necessity, from a business perspective (this bit is important).
HMRC’s rules around subsistence do mean you can claim for food and drink bought on a business trip, a place that is sufficiently far away from an individual’s normal place of work. HMRC defines a “normal place of work” as one an employee attends regularly for the performance of the duties of the employment.
Therefore if you are travelling a suitable distance from your normal place of work HMRC are happy you wouldn’t be buying the food in that location if it wasn’t due to your work/business activity.
This is HMRC taking the view that this purchase of food and drink is wholly and exclusively for the purpose of the business.
You must ensure food and drink costs are reasonable though, Michelin stars and al a carte menu’s would sadly not be deemed acceptable. A Greg’s meal deal would be.
The word entertainment often has some confusion around it.
If you are meeting a contact or new prospective customer in a local coffee shop for example, HMRC would deem this as entertainment and as such no VAT or corporation tax relief could be claimed.
The drinks or food consumed would not fall within HMRC’s definition of “subsistence”
The same can be said for any food, whether a sandwich, or a meal. If it does not fall within HMRC’s guidance on subsistence, then it would be classed as entertaining by HMRC and tax relief of any kind is not available.
If you are entertaining customers though the costs can be paid via your company, but they are added back (not allowed) for tax purposes when completing the company corporation tax return.
Any meeting held with employee’s for business purposes, where food is provided for all staff is potentially allowable as long as the business element outweighs the social aspect. For example if employee’s give their lunch break up to attend an update course and food is provided by the employer.
You could also buy a member of staff a food or drink gift of their choice though for a work anniversary, birthday or a Christmas present. As long as it is no more than £50 it is tax deductible.
Unless there is travel away from a normal place of work it can be very difficult to justify how the food or drink consumed is tax deductible.
Once the rules are understood you realise there are relatively few circumstances where food and drink can be claimed for as a tax deductible expense.
If you are unsure about tax relief on any costs within your business, please don’t hesitate to contact one of the team at Spark.