Expenses can be classed as necessities over all areas of your business, if you are unclear on anything and would like more assistance, please visit our website to find out more information.
For businesses, it is usually clear what is tax deductible and what isn’t, no matter what the size of your business is. However, when it comes to food expenses for entertaining clients in meetings, dinners and lunches, it is often confusing where the line is on what is tax deductible or not. Below we hope to clear this up for you.
Coffee Breaks, Lunches and Dinners With Clients
There is a common misconception that entertaining clients through purchasing of food are a reasonable tax deduction. This is widely misinterpreted information as it used to be tax deductible in the past and there is a portrayal on American TV shows that you can do this as it is allowed in America.
The HMRC doesn’t accept buying food as a method of client entertainment that is tax deductible no matter how important or vital the meeting is. This is because the food isn’t a requirement- the topics discussed over a lunch or coffee can easily be discussed anywhere and doesn’t necessarily have to be discussed under these circumstances.
Employee Entertainment e.g. Christmas Parties
Employee entertainment can be claimed as a tax-deductible expense of up to £150 per employee as it is labelled as a social function. This is considered part of traditional British business operation and so it is deemed reasonable by the government.
These costs of £150 can cover all aspects of entertaining your employees. It could be used to cover the rental of space or it could completely cover all food-related costs e.g. a Christmas meal.
Meals On The Job For Employees
This reinstates the first point on whether it is reasonable or necessary. For example, paying for employee food on-site could be considered a reasonable expense as it is a requirement of living and therefore work.
If you run an already paid for lunch trolley or cafeteria where staff then pay for the food they consume then this isn’t tax deductible as you have already recovered the cost. However, if you decide to offer free meals for all colleagues then you can claim this cost back as long as it is reasonable. This means a sandwich, snack and drink as opposed to a full dinner service with wine. You should also consider whether it would look reasonable to the HMRC so trying to claim a bulk of 200 sandwiches per week with 10 employees would look quite unreasonable.
Personal or Employee Subsistence
Another time you must consider the purchase of food is when you or an employee travel.
When away from business premises, you become entitled to claim food back as part of subsistence. This is the same way you would claim for transport and accommodation. It would be unreasonable to assume the employee travelling could access and prepare their own food or cook so, therefore, aren’t expected to cover costs personally of meals that would undoubtedly cost more than if they were preparing them themselves.
To summarise, food tax deductibles are more confusing than other tax deductions. It can be hard to find what your food expense comes under dependent on what business operation you are handling. Hopefully, this blog cleared a lot of the grey areas up so you can easily decide what you can claim back as an expense and what is not classed as a necessary expense.
If you are still unclear on this matter or would like any more information do not hesitate to contact us on 01908 046 964 or visit our website www.accountantmk.co.uk.