Food and drink expenses you can claim back on
When you spend money on food or drink in the course of running your business, it is possible to claim many of these expenses back so that you can bring down your end of year tax bill.
However, HMRC will not allow you to claim back a 9-course tasting menu at Gordon Ramsey’s Royal Hospital Road Restaurant. So what exactly can you claim for?
When it comes to deciding on what a valid business expense is that you can then claim back on, HMRC has strict rules in place. For something to be considered an “allowable” expense, it must be “wholly and exclusively” for the purpose of your trade.
Essentially, what this means is that HMRC want to see that you needed to spend the money to promote the interests of your business. Sometimes, this can be extremely difficult to prove.
Say you bought coffee and lunch for yourself and a potential client at a local café. Even if you spend the entire meeting talking about business, HMRC would not consider this “wholly and exclusively” for the purposes of your business.
Why? Well, HMRC has a rather blunt response to this question.
“Everyone must eat in order to live and such costs are normal costs of living incurred by all and not incurred for the purpose of trading.” So, an expense where you derive some sort of personal benefit – in this case, to stay alive and stave off malnourishment – and not just your job will not be considered an allowable business expense.
The same rule would apply if you decided to work out of a coffee shop instead of at home, purchasing coffees throughout the day or if a networking event does not include refreshments.
If your business relies heavily on your being on the road, there are certain expenses you may be able to claim back. It is important to note, however, that HMRC see a distinct difference between someone travelling a lot for business purposes and a businessperson actually RELYING on that travel in order to survive.
For example, if you go around the country to put on workshops, give presentations or perform, that would mean travelling is an integral part of your business without which it could not survive. In this case, the food and drink you buy during the day would be allowable in HMRC’s eyes, within reason.
Driving to work or between two business premises, however, does not count. These journeys are considered commutes which fall under personal mileage so you won’t be able to claim on any food or drink purchased during this journeys.
If you are unsure on what is considered an allowable expense or journey, speak to your Panthera accountant.
Travelling to visit a client is necessary every now and then and you can claim back on trips which fall outside of your normal working pattern. As long as the trip is a one-off and not a usual part of your routine, you will be able to claim on the food or drink you buy on route, again within reason. Similarly, if you are spending the day at a conference, you would be able to claim for your food and drink.
If your need to stay somewhere overnight on business, whether it’s working with a client or attending a training course, you may be able to claim for food and drink.
This can even include things such as a meeting running over time meaning that you cannot get home. However, the overnight stay must have occurred strictly for business reasons in order for you to claim on the expenses so staying for sightseeing or to meet friends during your trip would not count.
You should also be careful not to claim on food or drink on overnight stays too close to your workplace.
Buying a meal to win over a potential customer, or even just to treat an existing customer, is often though to be an allowable business expense. So, if you take someone out to dinner to convince them to choose your company, to thank them for their continued custom or to celebrate a project finishing, you can get your business to pay for it.
However, you will not be able to claim back these costs. This is because HMRC views these kinds of meetings as entertaining rather than being necessary to run your business – that means that they are not tax deductible.
Can I claim on my food and drink?
When in doubt, it is always good practice to ask yourself “if I was an employee, would my company have paid for this?” If not, and you would have had to pay for the food or drink yourself, it may be safe to surmise that you won’t be able to claim back on it.
For more advice on making the most of allowable expenses, speak to your Panthera accountant today on 01235 768 561 or email firstname.lastname@example.org.