Meals related expenses – what can I claim?

This is a complicated and often confusing area, but it helps to think about things using a few rules as detailed below, as this will cover most circumstances.

Wholly, exclusively, and necessarily

This phrase is at the centre of most of the rules around claiming tax deductible expenses.  If an expense was incurred wholly, exclusively, and necessarily in the performance of the duties of the business, then it will be claimable (with some exceptions).  All businesses are different, so what may be claimable by one, may not be claimable by another, depending on the nature of the business. It is important to keep a record of why you believe it complies with this rule and to keep receipts.

Client Entertaining

This is not a tax-deductible expense.  You can pay for it through the business but should code it to Client Entertaining so that it is taken account of in the tax calculation at the end of the year.

If you travel to see a client, and then take them out for lunch, you can still claim your travel costs.

Staff Entertaining, Christmas parties and other annual functions

Staff entertaining IS an allowable business expense, and VAT incurred is also allowable.

Whilst you are able to provide staff with meals and drinks etc, your employees may then have to include these on a P11D as they are taxed on “any benefit provided by reason of their employment” (with a number of exceptions)!  The goodwill gained by providing company events could quickly evaporate if your employees receive a tax bill relating to them!  However, there is the annual party exemption!

So, as long as the event complies with the 3 rules below, it will be exempt from the above:

• It must be annual (taking place every year – not a one-off event) – although there can be more than one in a year.
• Open to all employees
• And falls within the £150(including VAT) per head rule

This must be under £150 per annum per person attending (this includes VAT, regardless of whether you can recover it), and attendees can include spouses and other guests.  If you have multiple events that qualify, you would add the average cost per head together for each event in the year to check against the £150 test.

If the cost of an event goes above the £150 per head, then none of the costs associated with the event will be excluded under this exemption, and the value of the event must be declared either on each employees P11d, or the company can elect to do a voluntary settlement, whereby the company would pay the tax on behalf of its employees.

If these rules are adhered to, then the cost of the event, including incidental costs like transport, are all tax deductible.

Conferences, primarily for promotional and training purposes are not classed as staff entertaining.  They are fully allowable.  You should keep the agenda as proof that these events are for training and promotional purposes. You may need to prove that any entertainment or subsistence costs are incidental for the purpose of the meeting.

VAT – you can reclaim the VAT on staff entertaining in most circumstances.  Although this only includes current employees.  From a VAT perspective, expenses incurred on behalf of anyone other than a current employee, (sub-contractors are not included in the above), would not be allowable for a VAT reclaim.

Meals provided on site to staff

Providing employees with free tea, coffee and biscuits falls within this rule.  But meals provided on the company’s premises can also qualify, if they are provided at a “reasonable scale” and are available to all employees.

Expenses incurred whilst away from the office on business

If you are required to travel to a temporary place of work, or to a meeting etc, then any subsistence expenses you incur as a result of the business travel and tax deductible.