I’ve updated this post on 15 April 2020
Running a small business can be expensive. And know what food and drink you can claim as a business expense can be handy because it may reduce your tax bill.
The HMRC rules around claiming food and drink can be complicated. Why? Because it is so difficult for HMRC to know whether you are out eating and drinking for personal reasons. So they err on the side of caution.
This guide is for self employed business owners, different rules apply if you have a Limited Company.
Claiming Business Expenses
As you no doubt now if you have read my guide to claiming business expenses for the self employed, you absolutely cannot claim any personal expenses on your taxes.
And any business expenses you do claim for must be wholly and exclusively for the purpose of carrying out your trade. The cost of food and drink falls under the HMRC definition of subsistence.
Claiming Food on Your Tax Return
Here are the golden rules you need to live by when deciding if you can claim for food on your tax return:
- The cost of food and drink that you buy when travelling outside of your normal work pattern or daily commute is an allowable business expense;
- The costs of food and drink that you buy for personal reasons are not an allowable business expense. That includes times when you choose to eat away from your base of work;
- The costs of food and drink where an overnight stay is required is an allowable expense, as well as the cost of accommodation.
- Food, drink and accommodation where a trader is required to reside at the base of operation is not an allowable expense.
- Where your job is ‘itinerant by nature’ meaning it involves visiting clients at different locations on a regular basis, then costs are not an allowable expense.
Here are some common scenarios sole traders find themselves in wondering whether they can or can’t claim for subsistence on their tax return:
- A self-employed bookkeeper normally works from an office he rents. He travels to see a potential new client and buys lunch while on the road.
The bookkeeper can claim for food and drink as an allowable business expense because the journey is outside of his normal commute.
- An independent web developer is registered as a sole trader and agrees to work two days at a clients office on a weekly basis.
Any subsistence costs are not an allowable business expense because this is now a regular trip.
- A self-employed hairdresser stays overnight in a hotel to assist with a clients wedding.
The costs of food and the accommodation are an allowable business expense.
- A self-employed long-distance lorry driver spends the night in their cab rather than take overnight accommodation, the driver can claim for food and drink are an allowable business expense.
- A sole trader normally works at home but decides to work from a coffee shop for the day, buying food and drinks during the day as she works.
The cost is not an allowable business expense because everyone must eat to live and these costs are not necessary for the purpose of trade.
- A self-employed gardener has a number of clients and visits their sites. As the job is iterant by nature the costs are an allowable business expense.
How Much Can You Claim for as Subsistence?
Any claim for allowable food or drink as a business expense must be “Reasonable“
Unfortunately HMRC does not offer us a clear definition of “Reasonable”.
But the safest approach is to assume that what you buy should be on the more sensible side.
A meal deal from Pret would be acceptable but a night out with cocktails and lobster may go down well with HMRC.
As with all other business expenses, you’ll need to keep receipts to support your claim for any food or drink on your tax return
Claiming for Alcohol as a Business Expense
We all like a glass of wine after a busy day. The same rules for determining whether subsistence is an allowable business expense applies.
But any alcohol must be bought with your meal for it to be included as an allowable expense.
Again it must be reasonable. So this means a glass of wine or a beer with your meal rather than a whole evening in the hotel bar.
Can I Claim a Fixed Meal Allowance if I am Self Employed?
There is no meal allowance set by HMRC for food or drink that you can claim on your tax return as a flat rate if you are self employed or a sole trader. You’ll need to claim the actual costs of subsistence.
There are flat rates that you can claim for your home office and mileage. These are known as simplified expenses but they do not extend to food and drink.
Different rules apply for Limited Companies and their employees, where daily food allowance rules apply.