Subsistence – Is food on the job an allowable expense?
What is subsistence?
It makes sense that we actually first talk about what subsistence actually is!
Well, subsistence is a term used to define food and drink expenses that are necessary costs when travelling for business purposes. It also covers travel costs such as hotel stays and transport costs when working away. Therefore, given the definition, there is a really fine line as to what is allowable per HMRC, and what is not!
Surely if I’m out on business any food or drink I purchase is therefore a business cost?
Short answer is no!
You are a human and you need food and drink to survive, therefore it is not solely a business expense!
So what can I claim? Well the rules vary depending on if you are a Limited company or sole trader.
Rules for Limited Companies:
HMRC have some good detail on what you can any cannot claim for here: https://www.gov.uk/expenses-and-benefits-travel
To break it down:
- Food and drink costs whilst an employee is away from their permanent place of work are tax deductible for the company.
- It must be a reasonable cost – i.e. not dining at the Ritz and ordering bottles of expensive champagne!
- There must be a business purpose i.e. travelling to complete work for a client and staying overnight.
You can give your employees a subsistence payment instead of recording the full expense using the scale rates given by HMRC. These payments are made free of tax and national insurance and the company can then claim tax relief. The rates are as follows:
Breakfast rate – Up to £5
Can only be claimed if your employee is leaving home earlier than usual and before 6am.
One meal rate
Can only be claimed if your employee is away from home/their normal place of work for more than 5 hours.
Two meal rate
Can only be claimed if your employee is away from home/their normal place of work for more than 10 hours.
Late evening meal rate
Can only be claimed if your employee has worked later than usual and later than 8pm. They must have worked their full normal day too. In this situation, a rate of up to £15 applies.
Remember! You must have actually paid out for the food and drink to make a claim for subsistence. No food or drink, no claim!
Rules for sole traders:
Generally, for sole traders it is hard to have an allowable claim for subsistence! HMRC have some good information in relation to this here: BIM47705 – Specific deductions – travel and subsistence: expenditure on meals and accommodation – HMRC internal manual – GOV.UK (www.gov.uk)
If you are working away for business and not staying over night, it is really hard to justify that the expense is wholly for business. Why? HMRC argue the phrase you must eat and drink to survive, therefore it is not exclusive!
However, HMRC will accept a claim in the following circumstances:
- You’re a construction worker and your location is different every week.
- The occasional trip is outside your normal business pattern.
These rules are very complex and therefore individual advice should be taken.
What if I buy myself and a potential client a coffee? Is that classed as subsistence?
Now we’re coming into the rules of entertaining!
Whether it be an existing client or a potential client, it will be classed as client entertaining and for tax purposes this is not tax deductible.
Make sure you’re claiming correctly and if in doubt, contact us today to see how we can help!