Hello there, I'm preparing to start a career in bookkeeping (and possibly accounting as a next step), and attempting to familiarise myself with the kinds of issues I may come up against by looking into real accounting issues and questions for friends. I'd appreciate any input/insight into this one, which I've been researching for my contractor friend for a while now without gaining much clarity.
The contractor has a limited company (in construction) and wants to buy meals from local takeaway outlets which he would then eat with his subcontractors on their lunch break, on site. The fact that it's a self-employed contractor who works with self-employed subcontractors is confusing me somewhat, as most of the guidance seems to be for employers with regards meals for their employees (is that the same thing as a contractor and their subcontractors?), or for self-employed persons with regards their own meals only. But in any case, everything I've read so far suggests that in this case, the meals would quite possibly not be an allowable expense. Especially this webpage: https://www.gov.uk/hmrc-internal-man...anual/bim37660 ... and also this thread on here: https://forums.contractoruk.com/acco...e-lunches.html (there is no dedicated place of business, they're working at whatever site they're contracted to work on, and we're obviously not talking about employers/employees in the traditional sense).
However, I just wanted to check this, because this webpage (https://www.gov.uk/hmrc-internal-man...anual/bim45045) has confused me. It notes that "meals given to a self-employed person contracted for a particular piece of work may be regarded as part of the cost of that contract".
Also, this webpage gives several examples that make me think twice about my tentative conclusion: https://www.sutherlandblack.co.uk/gu...mited-company/
The webpage states: "If an employee is at a temporary workplace, then the travel expense rules apply, and any reimbursed food expenses can be claimed as legitimate expenses by the Company. This can be very beneficial for contractor Limited Companies where a contractor might be on a short-term contract at a client site". And that this applies for temporary workplaces up to 24 months. Would this apply even if the food is bought by the contractor, rather than being bought by the subcontractor and then reimbursed? And would the various sites at which they are working count as 'temporary workplaces' in this way?
The webpage also states: "There is another exception to the rule that says a team trip to the pub for lunch is not usually a business expense. HMRC allows up to £150 a year per employee of food expenses to be treated as a business expense rather than as a benefit to the employee. This allowance can either be made up of an annual event like a Christmas party or be made up of multiple events". This certainly sounds like it may apply, as his idea here is to thank and motivate his subcontractors during the jobs by providing a tasty shared lunch.
Both of these exceptions seem like they could apply, but obviously, not being in any way a tax expert, I'm struggling here.
If the meals can be classed as an allowable expense, how would this be recorded in the accounts? There seem to be at least three different possible ways - as a benefit in kind, as food expenses at a temporary workplace, or as employee entertainment - all of which apply to this situation but don't seem to fully encapsulate it.
I'm sorry if these are silly questions - I'm new to thinking about this kind of thing. I also recognise that tax advice is not within my remit as a bookkeeper, and I'd like to emphasise that this isn't a service I'm providing to this person. He is a friend, not a client, and I'm attempting to help him out by looking into this, as well as using the experience as a way of exploring the question of whether or not upgrading myself to an accountant may be something I want to do. So far, I'm really not sure I'm cut out for it! I'm hoping someone with specific knowledge of how all of this works for contractors specifically may be able and willing to help me out.
Many thanks for your attention, and thanks in advance for any input.
The contractor has a limited company (in construction) and wants to buy meals from local takeaway outlets which he would then eat with his subcontractors on their lunch break, on site. The fact that it's a self-employed contractor who works with self-employed subcontractors is confusing me somewhat, as most of the guidance seems to be for employers with regards meals for their employees (is that the same thing as a contractor and their subcontractors?), or for self-employed persons with regards their own meals only. But in any case, everything I've read so far suggests that in this case, the meals would quite possibly not be an allowable expense. Especially this webpage: https://www.gov.uk/hmrc-internal-man...anual/bim37660 ... and also this thread on here: https://forums.contractoruk.com/acco...e-lunches.html (there is no dedicated place of business, they're working at whatever site they're contracted to work on, and we're obviously not talking about employers/employees in the traditional sense).
However, I just wanted to check this, because this webpage (https://www.gov.uk/hmrc-internal-man...anual/bim45045) has confused me. It notes that "meals given to a self-employed person contracted for a particular piece of work may be regarded as part of the cost of that contract".
Also, this webpage gives several examples that make me think twice about my tentative conclusion: https://www.sutherlandblack.co.uk/gu...mited-company/
The webpage states: "If an employee is at a temporary workplace, then the travel expense rules apply, and any reimbursed food expenses can be claimed as legitimate expenses by the Company. This can be very beneficial for contractor Limited Companies where a contractor might be on a short-term contract at a client site". And that this applies for temporary workplaces up to 24 months. Would this apply even if the food is bought by the contractor, rather than being bought by the subcontractor and then reimbursed? And would the various sites at which they are working count as 'temporary workplaces' in this way?
The webpage also states: "There is another exception to the rule that says a team trip to the pub for lunch is not usually a business expense. HMRC allows up to £150 a year per employee of food expenses to be treated as a business expense rather than as a benefit to the employee. This allowance can either be made up of an annual event like a Christmas party or be made up of multiple events". This certainly sounds like it may apply, as his idea here is to thank and motivate his subcontractors during the jobs by providing a tasty shared lunch.
Both of these exceptions seem like they could apply, but obviously, not being in any way a tax expert, I'm struggling here.
If the meals can be classed as an allowable expense, how would this be recorded in the accounts? There seem to be at least three different possible ways - as a benefit in kind, as food expenses at a temporary workplace, or as employee entertainment - all of which apply to this situation but don't seem to fully encapsulate it.
I'm sorry if these are silly questions - I'm new to thinking about this kind of thing. I also recognise that tax advice is not within my remit as a bookkeeper, and I'd like to emphasise that this isn't a service I'm providing to this person. He is a friend, not a client, and I'm attempting to help him out by looking into this, as well as using the experience as a way of exploring the question of whether or not upgrading myself to an accountant may be something I want to do. So far, I'm really not sure I'm cut out for it! I'm hoping someone with specific knowledge of how all of this works for contractors specifically may be able and willing to help me out.
Many thanks for your attention, and thanks in advance for any input.
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