Confused over the HMRC rules for claiming food and subsistence?
HMRC will allow you to claim for meals and subsistence in certain circumstances. We have written this article from the perspective of a small business owner/director, and in response to queries from our clients. There are four basic principles to consider, that help determine whether or not food and subsistence can be claimed.
1. Dual purpose rule – eating to survive
- If you eat at home or your normal place of bbusiness in the same way an ordinary employee would, the expense meets the dual purpose rule. You are eating to survive. Your need to eat is not a direct result of being required to work and HMRC will not allow this expense.
2. Wholly and exclusively
- To qualify as a business expense, the cost must be incurred wholly and exclusively for the purpose of the trade, profession or vocation.
3. Allowable business travel
- Subsistence is normally incurred in conjunction with allowable business travel. In order to qualify as allowable business travel you must be required to travel away from your normal place of work in order to deliver your trade.
4. Normal places of work and temporary workplaces
- A normal or permanent place of work is a place where:
- The employee spends the whole of the duration of his employment contract working there, or
- He spends a significant amount (more than 40%) of his time working there and he is or is expected to be there for at least 24 months.
- A temporary workplace is defined as one which an employee visits for a limited or temporary purpose, for a duration of less than 24 months.
- In the case of contractors where the employment is expected to last less than 24 months, then the workplace (unless there are multiple ones) will be regarded as a permanent workplace.
Claiming subsistence expenses
- Subsistence is the tax definition of food and drink.
- You can only claim food and drink under the rules for claiming travel or in some cases entertainment expenses
- The expense must be reasonable and must be incurred as a direct result of being required to travel for your work. If you ate out at the Ritz each day, HMRC would call this excessive and deem it a personal expense. subsistence expenditure incurred shortly after leaving home, or shortly before arriving back home is disallowed by HMRC, as this spend is deemed to be a personal choice and not necessary.
- Subsistence costs incurred while making client or supplier visits, occasional on site working or travel to and from events and training courses fits the criteria of allowable travel expenses
- Staff required to work late at night at their normal place of work may claim for a takeaway meal, but a director/owner working late at night at home may not – as this is a personal choice and the option to prepare a meal is available to them.
Claiming employee entertainment costs
- If you eat with an employee or pay for an employee meal then it’s allowable as staff entertainment. This means someone on your company payroll as an employee. This is considered by HMRC to be an acceptable cost to the business of motivating and managing staff.
- Again, this must be reasonable, occasional and in line with the nature of the work being carried out. So a monthly team meeting, a directors meeting, an appraisal carried out over lunch or a project meeting held over a lunch break would all be considered as reasonable by HMRC.
- If you subsidise meals on a routine or regular basis, HMRC would deem this as a taxable benefit in kind associated with the employee’s terms of employment in your business.
Eating with a business associate
- If you eat with a business associate or friend and pay for both meals, it is deemed to be a personal spend and not allowed. There is no business justification for the expense being incurred.
Business entertainment – eating out with customers or suppliers
- If you eat with a customer or a supplier – it is called business entertainment. Pay for it with business money by all means. Include the expense in your management accounts but it is disallowed when it comes to calculating your taxable profits at your year end i.e these expenses are added back on when calculating trading profits that are subject to tax.
It is good housekeeping to keep detailed records of the reason for travel and the training course attended or client/supplier visited to back up your claim that this is a genuine business expense. The more thorough your records, the less likely HMRC are to challenge them should they come and check your records.
If you’d like to take a deeper dive into this topic, take a look at our bloody brilliant business expenses masterclass.
This masterclass covers the A-Z of business expenses. Learn which expenses can be put through your business, which are tax-deductible and which are not. Understand different accounting treatments for limited co and sole trader entities.
If you would like to get access to all of our Masterclasses, tutorials, workbooks, checklists and cheatsheets – our PROFIT HACKERS membership club is for you!