Claiming food and drink as a company expense

At AO Accountants, we often receive questions from clients regarding which expenses are permissible for charging to a company. While many expenses fall neatly into the category of either being a genuine cost of business or not, food expenses can present a murkier distinction. In this article, we aim to shed light on what food expenses are tax deductible and the circumstances under which they may not be.

According to HMRC, the UK’s tax authority, the cost of meals and beverages is generally not considered wholly and exclusively for the purpose of conducting business. This is because individuals derive personal benefit from consuming food, not solely for the sake of their company’s operations.

However, there are exceptions to these rules where food and drink may indeed be allowable as business expenses. Let’s explore these scenarios:

Business Travel:

• Subsistence expenses, which encompass food and drink, are typically incurred during allowable business travel. This includes situations where you are required to travel away from your usual place of work to conduct business activities. For instance, if you’re away filming for work, you may be able to claim reasonable costs for meals and breakfast.

Frequent Travel to Various Locations:

• Businesses that entail frequent travel to different venues, such as freelance graphic designers or touring musicians, may be eligible to claim deductions for relevant expenses associated with meals and refreshments.

Unusual Business Travel:

• If you travel somewhere for business purposes that you wouldn’t typically visit, such as for a client meeting, the cost of meals during this travel may be considered an allowable expense.

When it comes to claiming subsistence expenses, it’s crucial to adhere to certain guidelines:

• Subsistence costs must be reasonable and directly related to your work-related travel.
• Expenses incurred shortly before or after leaving home are generally not allowed, as they are deemed personal choices rather than necessities.

Employee entertainment costs are another area where clarity is essential:

• Meals provided to employees as staff entertainment are allowable business expenses, provided they are reasonable and occasional.
• You can understand more about claiming frequent employee lunches here

It’s important to note that dining with business associates, friends, or clients may not always be tax deductible:

• If you dine with a business associate or friend and pay for both meals, it’s considered a personal expense and cannot be claimed as a business deduction.

Contrary to common belief, entertaining clients through the purchase of food is generally not tax deductible:

• HMRC does not consider food as a necessary expense for business meetings. While you can use your company card to cover such expenses, they are typically not allowable deductions.

Remember to Keep Records:

Regardless of the nature of your business expenses, meticulous record-keeping is paramount. Ensure you retain all receipts and detailed documentation of your business-related travels, meetings, and entertainment activities. By maintaining thorough records, you can substantiate your claims and minimize the risk of challenges from HMRC during audits.

In conclusion, while navigating food and drink expenses for your business, it’s essential to understand the nuances of what can and cannot be claimed as tax deductible. By adhering to HMRC guidelines and keeping detailed records, you can ensure compliance while maximizing legitimate deductions for your company.