When you’re self-employed there are certain situations where you can claim food and drink as a business expense. But as anybody who’s been through this process knows, there are a fair few HMRC rules to get your head around first.
Mainly: you can’t claim for anything and everything eaten or drunk while working. The things you can claim for fit under three overarching categories:
1. Food and drink: Subsistence
‘Subsistence’ is the term HMRC gives to any food and drink expenses that arise out of necessity, from a business perspective (this bit’s important – more on it below).
Eating to live: why you can’t claim for everything you eat while working
HMRC’s definition of subsistence doesn’t include the food and drink you consume day in, day out while working. To understand this it helps to look at HMRC’s ‘dual purpose’ rule. This basically says that if something is necessary for reasons that aren’t work related, it can’t be claimed as an expense – even if that thing also benefits you in a business sense. In a nutshell:
Humans need to eat and drink to survive. So the costs associated with what we eat and drink in our normal day-to-day working lives can’t be classed as ‘wholly and exclusively’ for business. Because we kind of get a lot of personal benefit from that too (aka: not perishing).
What travel has to do with it: why you can claim for food on a business trip (within reason)
HMRC's rules around subsistence do mean you can claim food and drink bought on a business trip as an expense. This is because it classes this kind of expenditure as 'wholly and exclusively' for business purposes.
Even though you ‘need food and drink to survive’, HMRC is happy in the knowledge that you’re only buying that particular meal in that particular place because you’re on a business trip. It’s extra to your day-to-day living costs and quite often costs more than you’d normally pay. So it’s allowable as an expense.
There are limits to what you can claim, even when travelling for work
As with all HMRC allowable expenses, there are limits to what you can claim as part of your business trip subsistence costs. If you decide to indulge at a high-end restaurant three times a week on various business trips, HMRC will definitely not deem this acceptable. Any food and drink expenses you incur while travelling for business must be reasonable, and you should be able to prove this, too.
The difference between a normal place of work and temporary place of work
It’s important to understand the difference between HMRC’s definitions for a ‘normal place of work’ and ‘temporary place of work’. This is because any food or drinks you buy on the way to, and during a day at your normal place of work cannot be claimed as a business expense. Food and drink you buy on the way to, or during a day at a temporary place of work can be claimed (within reason).
A normal place of work… is the: “place at which an employee works is a permanent workplace if he or she attends it regularly for the performance of the duties of the employment.”
A temporary place of work… is classed as such: “if an employee goes there only to perform a task of limited duration or for a temporary purpose.”
Here are two examples explaining how these two definitions affect food and drink expenses:
Richard has a business meeting with a customer in a different city. It’ll take him most of the day to travel there and back because it’s a two hour train journey each way. When he arrives he goes to a cafe to have some lunch before his afternoon meeting.
Richard can claim this as an allowable expense, as he’s travelling away from his normal place of work to a temporary place of work.
Lucy is a freelance writer and spends a lot of time working in cafes in her local town. One day, she decides to meet a client at one of her regular haunts for lunch to discuss a new project.
Lucy can’t claim this as an allowable expense as the meeting is taking place in a regular place of work for her. She’s also in her local town, so could technically have had lunch at home before or after meeting her client.
2. Food and drink: entertainment
The word ‘entertainment’ can throw up some confusion when it comes to allowable business expenses (especially given what we’ve just talked about in the previous section).
Wining and dining clients is a ‘no’
Despite what’s often portrayed on films and TV – you can’t write off the cost of entertaining clients in a ‘wining and dining’ sense. In other words, you can’t take a business associate or client out to dinner and claim the bill as an expense.
So in this respect, this is one food and drink cost that isn’t tax deductible.
It gets a little tricky here, though, because something that you can write off as a business expense is the cost of hosting a ‘marketing event’ for your business. This could involve food and drink and still be allowable, but there are other criteria to meet too. More on that in the section below.
So, as a sole trader, I can’t write off the cost of entertaining potential clients?
No – there aren’t any allowable expenses for taking a potential customer out to dinner, even if it’s to try and win their business.
3. Food and drink: Marketing
Another allowable food and drink expense relates to marketing events for your business.
Say, for example, you were running a workshop to promote your services, and wanted to provide breakfast. The cost of this is classed as an allowable expense, as long as the event – and everything it entails – is free to those who attend. You’ll also need to be able to prove that the event was designed with the sole purpose of attracting new business.
It’s also important to note that the event should offer something other than just food and drink, otherwise it’d veer too closely into entertainment territory. Like a talk from a key speaker, the demonstration of a product, or even a fun charity angle like sports or games.
Content supplied by India Johnson and Finmo. Check out the full article at https://finmo.co.uk/sole-trader-what-food-drink-expenses-can-i-claim/
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