Food and Business - the meal tax deal
Lodged deep in the psyche of the business owner is the idea of the tax deductible business lunch. It turns out that the question of whether a meal is tax deductible as a business expense is not easy to answer. However at Co- we are up for the challenge. Here is what you need to know.
Entertaining
The business lunch is of course most associated with entertaining clients. The bad news is that notwithstanding popular US culture, in the UK entertaining clients or suppliers is never a tax deductible expense. That is not to say entertaining should not happen nor that it should not get paid by the business, but at the time of submitting a tax return, the expense of entertaining clients and suppliers must not be included.
It is important to note this rule includes suppliers. If your business buys food for freelance workers it will be seen as entertaining. In the creative industries it is common for freelance teams to be given lunch as part of the day’s work. This will be deemed entertaining unless the lunch has been promised as part of the agreement (ideally in writing), then it is seen as a payment in kind.
However some entertaining is tax deductible - namely entertaining PAYE staff. Here HMRC is very clear, for the entertaining to be tax deductible it must be for people on the business’s payroll. Even then there are limits. Food must be provided on the premises. There are only two exceptions to this rule about the food being provided on the premises - the Christmas party and the summer BBQ. For these events, food can be provided off-site and still qualify as tax deductible up to a maximum of £150/head.
Business Trips
The clearest exception to rule that food is for the individual is the business trip. On a business trip it is accepted that the individual will have to buy themselves food whilst away and cannot be expected to feed themselves because they are away from home.
There are limits to what can be spent. HMRC guidance draws the line at ‘fine wines’ and unnecessary extravagance.
So what is a business trip?
This then begs the question of defining the business trip and here things get hard to pin down. An overnight trip to the NEC to visit a trade exhibition will definitely qualify as a business trip. An overnight trip to Birmingham to visit family clearly doesn’t. If the overnight trip to Birmingham involves both visiting the NEC and family HMRC expects us to be clear which is the primary purpose.
We will almost certainly not have questions about buying lunch in Birmingham on a day trip to the NEC trade show and generally out of town is a fairly safe line to draw. But then travelling from South London to North London to visit a client or supplier could equally take the best part of a day so where do we draw the line?
Normal Patterns of Work
To complicate things further HMRC is not happy for the business trip to apply to a concept it calls a ‘normal pattern of work’. A plumber is almost certainly out and about all day visiting properties. HMRC is absolutely clear that this does not mean they can claim lunch at a cafe every day as business expenditure. In a similar vein a locum doctor who visits a regular roster of GP Practices should not claim lunch expenses for business. So the rule is that if the trips you make for business are in the normal pattern of the work you cannot claim food as a business expense.
Itinerant Workers
Then again there is an allowance for workers who are required by the nature of their work to spend extended periods away from home, then all food can be claimed as an expense. This would apply to travelling salespeople or truck drivers for example.
Business Trips in summary
To simplify things down we advise that in the following circumstances business owners are safe to claim food as a business expenses:
Overnight trips that have a business purpose
Trips out of your town that have a business purpose
Trips within the locality that are exceptional (ie they do not form part of a normal pattern) with a business purpose (eg an author meeting to negotiate a publishing deal)
Extended trips and itinerant trips away from home necessitated by work
