You work from home and engage in lengthy online meetings with customers and colleagues. If you buy food you can discreetly eat to avoid taking a break, can you claim a tax deduction for it?
Tax deductible food
Whether tax can be deducted for the cost of food has been the source of many disputes with HMRC over the years. These days the position is clearer although not trouble free. The rules which determine whether a tax deduction is allowed are different depending on whether you’re an employer, employee or self-employed (including business partners).
Wholly and exclusively
We aren’t going to look in detail at the historical arguments as they are now largely irrelevant. Suffice it to say that the contentious aspect was always so-called “duality of purpose”. As you probably know, the tax rules prohibit a deduction for expenses unless they are “wholly and exclusively” for the purpose of the job/business. As food is required for personal reasons (you need it to live!) it inevitably fails the wholly and exclusively test. However, practice and case law eventually settled on an imprecise compromise where HMRC would allow tax relief for the cost of food where it was linked to a business journey. Eventually this was refined and incorporated into tax legislation.
Self-employed and partners
To regularise tax deductions for the cost of food, legislation was introduced in 2009. For once it’s written in plain English and is worth a read as it contains several nuances. In essence, the rule is that if you incur expenses in the course of business travel and are entitled to a deduction for them, you’re also entitled to a deduction for the “reasonable” cost of food and drink.
The position for employers is simple. If they pay for food for employees (or directors) it’s tax deductible from their profits even if it’s for staff entertaining. The other side of the arrangement is that the employee may have to pay tax and NI on the cost incurred by their employer (who must then pay employers’ NI). There is no tax or NI if the employee would be entitled to a tax deduction if they had incurred the expense themselves.
Employees and directors
For employees and directors deductions for subsistence are covered by one main rule with a couple of variations. It broadly reflects the rule for the self-employed. The legislation is incorporated into that relating to expenses incurred in respect of job-related travel. In short, if there’s tax-deductible job-related travel the cost of food and drink for subsistence is also tax deductible if incurred by the employee and so not taxable where the employer pays for it.
As a self-employed individual or business partner if the meetings don’t involve business travel the cost of food is not tax deductible. If you’re an employee or director and your employer pays it can claim a deduction for the cost but you would have to pay tax on an equivalent amount as a benefit in kind.
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.