Self-employed

For a self-employed person, the general rule is that there is no relief for subsistence costs – this case has been tested in the courts – unless it is an incidental part of the job. So, lunch whilst you are working would not count as you need to eat to survive but if the food or drink is wholly and exclusively for the purpose of the business it would. There is no HMRC guideline on what constitutes as reasonable so if you are unsure we would be happy to discuss this with you.

However, there is an exception for journeys which are occasional instances outside of a normal pattern (as opposed to part of a normal working pattern) or what is known is an itinerant trade (e.g.  a jobbing bricklayer working from site to site), so in these two cases, a subsistence cost can be allowed.

 

Employed

For the director, if they travel, and the journey qualifies as a business journey, then related food costs are also fine – for example lunch purchased from a supermarket or café whilst working at a client’s premises, or evening meal when staying away on business overnight.

You do not have to be totally austere with what you can eat, which HMRC agree in their manuals, if you are only 5 miles down the road a champagne and lobster lunch would probably be considered unnecessary! Common sense is key.

Staff entertainment is tax deductible for the employer, whilst entertainment of customers, suppliers, introducers and anyone else is not.

It is also worth noting that although staff entertainment is deductible for the employer, it is potentially taxable on the employee as a benefit in kind, but there is an exemption for annual functions such as Christmas parties up to £150 per head.

An additional point to note is that food and drink given as a gift is not allowable.

 

More information on scale rates can be found here: //www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim30240

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