Can You Claim Food Expenses in a Limited Company? Discover the Rules

Running a limited company in the UK is a matter of great responsibility in terms of legal and fair expenses. Food expenses tend to confuse employees and directors, unlike other expenses. You might wonder whether you can claim meal expenses as tax relief. It doesn’t have a straightforward answer. HMRC is very strict on this topic. 

In this blog, we will explain when you can/can’t claim employee food expenses, meal expenses for business, business meal tax relief, and whether meals for directors are tax-deductible. We will keep it simple so you understand how to save money legally.

Let’s take it step by step.

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What Are the Food Expenses in Limited Companies?

You are operating a small business, and you have the question of what is considered an allowable food expense. You can deduct the cost of business wholly and exclusively as HMRC allows. The food cost for employees is allowed only in some situations. 

For example, when your group of employees travels for work, you can deduct the expenses of food and subsistence. Subsistence involves food and beverages when the employees are working away from their normal location. 

To make claims easier, HMRC provides scale rate payments for subsistence. While you don’t need to collect every receipt, you must have a system in place to ensure employees undertook a qualifying business journey and incur an expense.

Hours away from the Workplace	Subsistence Allowances
5 hours	£5
10 hours	£10
15 hours (ongoing at 8pm)	£15
Incidental Overnight Expenses	£5 per night (UK)

Everyone has to eat something every day, which is why the daily lunches are not tax-deductible expenses of the business. But you can serve food in a company’s internal cafe without taxation in case you serve all the employees. This rule is also for directors. In the case that the meals are subsidised, the benefit may be subject to tax unless tax-exempt.

Key Rules for Food Expenses for Employees

You have employees in your limited company, and at times, they purchase food at work. Is it possible to claim them as food expenses for employees? Yes, provided that it is under certain conditions.

1. First, when travelling. When an employee is travelling on business, and he/she stay overnight, they can claim reasonable meal expenses. HMRC calls this ‘subsistence’. Day trips include meals when the employee has to work a minimum of five hours away.
2. The employee will not be able to claim food expenses when he/she is eating in their permanent workplace. An illustration would be a sandwich at the workplace every day. However, when they go to a client location, the lunch price is a deductible expense.
3. Most limited companies tend to offer meal tickets or subsidised canteens. In case you provide the staff with free meals, the employee is not taxed. But when this perk is only available to directors, it is taxable.
4. You have to declare the non-exempt meals on form P11D and make a payment on Class 1A National Insurance. To avoid this, follow the exemptions of HMRC.
5. In the case of overseas travel, there are increased rates. HMRC provides benchmark scale rates for overseas subsistence. Therefore, examine the specific rates for the relevant country when travelling internationally. This makes your claim remain within the law.
6. Practically, per diem allowances are common in most limited companies. You also pay a flat rate, and When paying a flat rate using HMRC’s benchmark scale rates, employees don’t need to submit receipts for the allowance itself, but the company must have a system to confirm that expenses were genuinely incurred.

Are Directors’ Meals Tax Deductible?

In the UK, directors’ meals are normally not tax-deductible except if they fall into certain requirements. HMRC will consider deductions only where the expense is wholly and exclusively incurred for business reasons. Meals during overnight business travel or at events, including staff entertaining, can pass the test. 

Meals consumed close to home or at a regular workplace are not tax-deductible. However, a director’s own meal during qualifying business travel or an off-site meeting may be allowable as subsistence. Directors of limited companies need to be particularly vigilant, as director-only meals are not to be regarded as entertaining staff.

Proper records and good business justification must be maintained to ensure compliance and substantiate any claims if audited by HMRC.

What Food Expenses You Can Claim

Not every cost of food gets a tax relief. HMRC will only grant claims where the cost is wholly and exclusively for business reasons.

Business Travel and Subsistence

If you or your staff travel for business, you can claim the cost of meals as business expenses. They are called subsistence expenses. You have to satisfy some conditions:

• The trip has to be away from your usual place of work.
• The journey must be for a business reason.
• The meal needs to be reasonable in price.

For instance, if you attend a seminar in another city and purchase lunch, you can claim the cost.

Temporary Workplaces

You may also claim for food costs when working in a temporary place of work. A workplace is generally temporary if you are there for a limited time or purpose. However, it will be treated as a permanent workplace (meaning travel expenses cannot be claimed) if both of these are true: 

1. You spend, or expect to spend, more than 40% of your working time at that location.
2. Your work there lasts, or is likely to last, for more than 24 months. 

If either of these conditions is not met, the workplace can remain temporary, and travel expenses may be claimable. If you qualify, you can claim:

• Meals for the temporary job
• Snacks and drinks purchased while working away

This benefits employees and directors who frequently travel or work on short-term employment contracts.

What Food Expense You Can’t Claim

HMRC does not allow you to claim regular meals in the office as it is personal expenses. 

Normal Meals and Commuting Lunch

You can’t claim food purchased as part of your normal commute or lunches consumed at your normal work location. These count as your personal expenses. Like:

• Purchasing a sandwich on the way to the office.
• Having lunch ordered while working from your normal desk.

HMRC considers these normal living expenses and not business. 

Entertaining Clients

It may be a business activity to take a client out for dinner or lunch, but HMRC does not permit tax relief on entertainment. That includes:

• Dinners or lunches with clients.
• Drinks at networking meetings.
• Hospitality expenses.

You can account for these costs in your books, but you won’t receive tax relief or VAT recoverable on them.

Meal Expenses for Business – Rules and Deductions

You go to meetings or other events, and a meal is served. What does the meal cost in business? HMRC draws the line between subsistence and entertainment.

• Subsistence reimburses your or your employees’ meals when traveling. These are deducted as a whole from your corporation tax.
• Entertainment involves taking clients or suppliers to meals. These costs cannot be deductible. HMRC considers them non-business expenditure, although the work is official.
• For instance, if a client comes to you to have lunch to make a deal, the cost of the client’s meal is considered entertainment and is not deductible. While the company can pay for it, the expense is added back when calculating taxable profits.
• Staff parties, it’s a different case. You are allowed up to £150 per employee/per year on events, including food, which is tax-free. This improves employees’ morale without a tax hit.
• When you are working late, a meal will pass as subsistence. But you must have it proved that it is connected with business requirements, not routine.
• Sole directors are treated like employees and can claim for meals during qualifying business travel. The rules are strict and require a valid business purpose away from the normal workplace, just as with any other employee.
• Keep receipts for all claims. When making inquiries, HMRC may ask for evidence and, therefore, note everything.

The Bottomline

HMRC clearly allows and disallows tax-deductible food expenses for limited companies. Food falls under the category of subsistence or entertainment, varying from situation to situation. You cannot claim your daily lunch, but some exceptions do allow deductions. 

Deductions are only for meals while on business travel or working away from the office. Directors’ meals are acceptable only if they’re required for business purposes, not routine or personal purposes. Keep clear records, make HMRC’s scale rate payments where available, and take professional advice if in doubt. 

Let’s talk to our accredited accountants and professional tax experts to sort out all your tax problems in one go at the AccountingFirms. Don’t hesitate to give us a call or send us a message.

 

Disclaimer: All the information provided in this article on claiming food expenses in a limited company, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.