Food Business Tax Deductions You May Be Missing
As a business owner there are certain tax deductions which you can make against your business and your accountant is the best person to advise you on what you can and cannot claim for – however, if you are organizing your taxes yourself there might well be food deductions you are missing out on.
If you are unsure about what you can and can’t claim for there is lots of advice and information on the HMRC website and they also provide training webinars and other support so you can always seek help from there.
It also helps to speak to authorities in the field and get their insights about this subject. For this post we turned to Crunch – a known authority for small business accounting, to give us a guide on what kind of deductions you can claim. Check out their list below of deductions you can claim for, and what you can’t claim for.
Eating Daily Food e.g.… Normal Lunches
If you are eating at your place of work in the same way as you would at home, as in, you are simply eating your daily lunch; you cannot claim this on your expenses. This is just food you need to survive and is not directly business related. You cannot claim for this type of food.
Food Business Expense
For a food expense to qualify as a business expense, it must have occurred solely for a professional or trade purpose only, for example, taking clients out for a meal to discuss a new proposal or contract – see details below.
Subsistence means food and drink, in tax terms and can only be claimed for under the same rules as when you claim business travel or potentially business entertainment tax deductions. You need to make sure there is always a legitimate business reason for claiming.
It needs to be a reasonable amount and the expense needs to have been generated directly because you had to travel for your work. If you tried to claim lunch at a five star restaurant on a daily basis this would not be considered reasonable.
Your costs must have been incurred as a result of travel due to visiting clients or suppliers, potentially on-site working at another site, or travel for training or attendance at professional events – it needs to be deemed a necessary part of your job to be accepted by the HMRC.
If you decide to pick up a sandwich on your way home from the office, this is not an allowable tax deduction but a personal expense. If staff are being asked to work late or in a different site and need to order a takeaway, this can be classed as a food business expense.
However, if a director is working late at home, they have the choice to make their own food so if they ordered a take away it couldn’t be classed as a business expense. The rules around food business tax deductions are very specific.
Staff Entertainment Costs
As a boss, if you take your staff out for a meal and pay for it you can claim that back as a food business tax deduction under staff entertainment. This only applies to someone who is on your payroll but will be accepted by HMRC as it is considered part and parcel of managing staff.
It needs to be a reasonable expense but can cover business-related meetings such as a team meeting, a project meeting with a working lunch or an appraisal which happened away from the office over lunch, for example.
Dining with a Business Colleague
If you were to go out for a meal with a business colleague or a friend from another company and pay for their meal, that can’t be tax deductible – it would be classed as a personal expense because there is no business element to it.
Dining out with Clients or Suppliers
Dining out with a client or a supplier to your company can be claimed under business entertainment. It can be paid for using business money and included in your accounts but it will be added back in when your taxable profits are worked out at the end of the year.
Keeping Good Records
Whichever type of food business tax you are claiming on your expense you should always keep details. So if you claimed as part of a training course, a staff meeting or a client visit, there should always be records of those events, as well as all of the receipts for the food and drink claimed as well.
People often get very confused about what can and cannot be classed as a tax expense when it comes to food and entertainment but the key rule to remember is that it must have a legitimate business reason behind it.
You cannot claim against your daily lunches, or just having dinner with a business friend – your reason for claiming food and drink needs to be clearly business-focussed and recorded for the HMRC to agree to it.