Is Food Tax Deductible? Accountants Explain
Author: Russell SmithDecember 12, 2017
From employee lunch to meetings over dinner, find out if the food your business is paying for is tax-deductible.
Business expenses come in all shapes and sizes, from buildings to rubber bands. A lot of what you buy for your company is either clearly tax-deductible, or isn’t. But when it comes to food, most businesses owners aren’t up-to-date on where the line is.
Entertainment of Clients at Dinner Parties, Lunch Meetings or Coffee Breaks
There is a common misconception in the business world and one that our accountants encounter on a regular basis. The myth is that entertaining clients through the purchasing of food is a reasonable tax deduction. There are two reasons for this:
- It did use to be a deductible
- It is a deductible in America and often features on American TV shows
Both of these facts have meant the idea has continued to bleed into the consciousness of Directors and SME owners — the idea that they can take a client out to lunch and charge the food as a tax deduction. But this is a mistake.
Buying food as a method of client entertainment is not an accepted tax-deductible by HMRC. It doesn’t matter what the purpose of the meeting is; even if it’s to discuss a vital change in partnerships or client policies, you will not be allowed to claim.
The reasoning behind this decision is simple. Food is not a requirement in having a meeting. You can discuss the same things over lunch as you could a desk at work or a park bench, which means the food is not a necessary expense.
Tax Deductible Food for Employee Entertainment — e.g. Christmas Parties
So client entertainment is out the window, which means employee entertainment is also out the window, right?
Employee entertainment can be claimed as a tax-deductible expense — up to £150 per employee. Labelled as a social function, and therefore a part of traditional British business operation, these events are considered reasonable expenses by the government.
This £150 is inclusive of all aspects of entertainment. For example, rental of space, tickets to events or booking fees. However, it can be entirely food-related if you take your staff out for a Christmas meal, for example.
Employee Meals on the Job
Food tax deductibles are related to how reasonable and necessary they are for working life. Which means that paying for employee food on-site would be considered a reasonable expense, as it is a requirement of living and therefore work, right?
Meals for employees are tax-deductible when relating to the day-to-day business operation, but only under certain criteria. Running a paid cafeteria, or providing a lunch trolley, where employees pay for food, means you cannot claim the items back as an expense, as you’ve recovered the cost. However, if you offer free meals to all staff, you are allowed to claim the costs back to a reasonable extent.
For example, it is reasonable to provide all employees with a basic lunch — sandwich, snack, drink. It is not reasonable to provide a five-course meal with wine and table service. When buying in bulk, you should also consider employee figures. Trying to claim 100 pack of paninis per week for a roster of four employees isn’t going to fly with HMRC.
Personal or Employee Subsistence
Another occurrence where you’ll need to purchase food while on work time is when you, or a staff member, travel.
When ranging away from the business premise, you become entitled to claim food back as part of subsistence, in the same way as transport and accommodation. The thought process behind this is that, if we sent one of our accountants to London, it would be unreasonable to consider that they could access and prepare their own food, which means they’d need to buy more expensive meals. Therefore you aren’t expected to cover the cost personally, which means food becomes a tax-deductible expense.
A Summary of Food Tax Deductions from Our Accountants
Unlike most tax deductions, food tax deductibles can be somewhat of a grey area. While some elements are clear-cut, others are not so. With so many instances where you may have to pay out for food during business operations, it can be hard to align the transaction with a specific type of expense. If you have any confusion about whether or not your food was tax-deductible, it’s worth getting advice from a professional accountant.
Are you in need of help figuring out what tax deductions you can make before the January tax return deadline? Our expert Leeds accountants can help! Get in touch today for a bespoke service from high-quality finance professionals.
Russell Smith is an award-winning accountant and founder of RS Accountancy. With over a decade of experience running his company, he has worked with countless small businesses just like yours, helping them grow profits and manage their finances. Russell is also a prolific financial writer, having contributed to such publications as The Guardian, The Telegraph and The Daily Mail.