Meals bought by contractor for subcontractors - allowable expense?

[ladymuck]

AccountingWeb is a decent site for asking bookkeeping/accounting questions but they can far less tolerant than some folk here.

Have you done a bookkeeping course? The basics of bookkeeping are less about tax rules and more about the correct recording of day to day transactions. Sounds like you're getting ahead of yourself.

[northernladuk]

I don't mean to sound or come across harsh so please read this as very kind, gentle and friendly piece of advice.

Aww that's very nice of you Craig

Please tell your friend to seek the advice of an accountant and tax advisor.

Ooouuch! That's gotta sting.

[NotAllThere]

I don't mean to sound or come across harsh so please read this as very kind, gentle and friendly piece of advice. Please tell your friend to seek the advice of an accountant and tax advisor. What you're doing is what I've seen time and time again which falls under the bracket 'my mate down the pub said I could do this and that'. What then tends to happy is that their accounting records and returns get really messy. You could also ruin your friends trust if you start giving incorrect advice which would bite them in the bum! If they don't have an accountant, they need to get one as CIS penalties can be draconian if they are not done correctly.

My recommendation for you is to look at doing AAT if you want to do bookkeeping. Please don't continue your career into bookkeeping using google and forums for free advice! There are some fundamentals and misunderstandings from your post which doing a proper course will give you a much greater understanding. Good luck!

Yep. When I was contracting I had a qualified bookkeeper doing the books and an accountant for questions such as the friend raised.

[Craig@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.

Welcome to the forum and your career path as a bookkeeper. Let's break your post down into sections and take it from there. Firstly, your contractor friend would presumably be an employee of their limited company. They would be both the employer and employee of their limited company. The subbies can be set up as a limited company or be self employed. The fact that their trade is in construction is a red herring in terms of your question about food/lunches. Your contractor friend is not "self-employed". You need to understand the difference between employed, self employed, partnerships and officer holders.

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 above explains the temporary workplace. For your contractor friend working through their limited company, if they cannot predict or haven't been at that site for more than 24 months, they can claim for their food expense. Your contractor friend can pay for this themselves out of their own back pocket and then claim it back from their limited company or have the limited company pay for it direct. If any food if bought for the subcontractor, this would be a disallowable expense or treated as business entertaining which again is disallowable for CT purposes.

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 it's a random tasty shared lunch and not an annual event then no it's not an allowable expense.

You need to understand the basics of staff entertaining, business entertaining and client entertaining and the difference between them and what is and isn't allowable before giving any advice.

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.

Only lunches for your contractor friend can be treated as an expense provided that they fulfill the temporary workplace rule. This would be recorded as travel and subsistence in the accounts or something similar depending on the accountancy firm and their standard chart of accounts.

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.

I don't mean to sound or come across harsh so please read this as very kind, gentle and friendly piece of advice. Please tell your friend to seek the advice of an accountant and tax advisor. What you're doing is what I've seen time and time again which falls under the bracket 'my mate down the pub said I could do this and that'. What then tends to happy is that their accounting records and returns get really messy. You could also ruin your friends trust if you start giving incorrect advice which would bite them in the bum! If they don't have an accountant, they need to get one as CIS penalties can be draconian if they are not done correctly.

My recommendation for you is to look at doing AAT if you want to do bookkeeping. Please don't continue your career into bookkeeping using google and forums for free advice! There are some fundamentals and misunderstandings from your post which doing a proper course will give you a much greater understanding. Good luck!

[NotAllThere]

IT = Information Technology.

To clarify. The majority of people here are IT contractors. Not building contractors.

[northernladuk]

Sorry, yes, that's me being dim. To me, everyone who isn't an employee is 'self-employed', but that's not what I mean here, obviously. He has a Ltd company and hires subcontractors.

Well you'd be wrong.

https://www.gov.uk/employment-status

If you are going to do people's books you really need to understand their business model.

It's not obvious to me. We often get people mixing up self employed and LTD contractors so something that needs to be clear.

[cojak]

IT = Information Technology.

[msbk]

If that is the case then you really want to be joining AccountingWeb and asking experts in the field. You are just asking a bunch of contractors on here. As it happens we have some very knowledgeable people and the odd accountant so you are likely to get an answer by luck and a prayer but AccountingWeb is your SME forum really.

Thank you for your input. I have joined and asked the question, but am still waiting for the thread to be accepted. In the meantime I thought it might be good to try and get a perspective from someone with specific experience/knowledge of contracting and subcontracting. I'm hoping to get input from both angles to be honest!

This is certainly not what you are after. This is for xmas does, parties, events. Not casual food.

Thanks for this.

I would have been interested in having a pop at this but from the off you say...


Confused me as well. He can't have a LTD company and be self-employed so I think you've confused yourself by not setting out the facts of the case properly to start off with?

Sorry, yes, that's me being dim. To me, everyone who isn't an employee is 'self-employed', but that's not what I mean here, obviously. He has a Ltd company and hires subcontractors.

to add to what NLUK says, if this is a contractor in construction then CIS rules may well apply. And we don't use CIS rules in IT.

Thank you for your input. Yes, CIS does apply. But I thought that normal rules for expenses etc would still apply anyway. What do you mean by 'IT'?

[Lance]

to add to what NLUK says, if this is a contractor in construction then CIS rules may well apply. And we don't use CIS rules in IT.

[northernladuk]

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.

If that is the case then you really want to be joining AccountingWeb and asking experts in the field. You are just asking a bunch of contractors on here. As it happens we have some very knowledgeable people and the odd accountant so you are likely to get an answer by luck and a prayer but AccountingWeb is your SME forum really.

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.

This is certainly not what you are after. This is for xmas does, parties, events. Not casual food.

I would have been interested in having a pop at this but from the off you say...

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,

Confused me as well. He can't have a LTD company and be self-employed so I think you've confused yourself by not setting out the facts of the case properly to start off with?

[msbk]

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.