Reply to: Food Allowance

[stphnstevey]

Loads of discussion and nobody really knowing the answer!

I have claimed food expenses on business journeys for years. it's an allowable business expense - end of

[Bob Jones]

Lisa is quite correct and her statement is based on a Tax Case from just over 30 years ago – one where it was argued that it was the strenuous nature of the job caused the person to eat more (and consequently spend more) than would otherwise have been the case. The following is an adaptation of the HMRC manual with regard to employees:
To qualify for a deduction the subsistence costs must be attributable to the business travel in the sense that they are costs incurred in the course of the journey that are additional to any costs that the employee would incur if it were not for the business travel. Once it is accepted that the employee has incurred allowable subsistence expenses it is not necessary to take into account the costs saved as a result of the business travel. For example, if the employee needs to eat in a restaurant while on a business trip a deduction for the full cost of the meal can be granted without any adjustment for the costs saved by not eating at home.
The following is a direct quote from the manual relating to those in business on their own account:
“The cost of meals taken away from the place of business is not in general an expense incurred wholly and exclusively for business purposes, since everyone must eat in order to live.
“But extra costs may be incurred wholly for business purposes where a business is by its nature itinerant.”
It is the journey that is the key not the simple act of eating or the appetite of the individual AND there has to be an additional cost.
Bob

[LisaContractorUmbrella]

I would have thought the very nature of having to go to work as opposed to staying at home and doing bugger all (On the bench) would lead to the conclusion that when at work, you would be required to consume more calories. Therefore, surely the difference in the number of calories consumed when at work as compared to when doing bugger all at home would be a quantifiable amount that could be classified as being solely for the benefit of the business.

Unfortunately not Weltchy. From HMR&C:

The cost of food or drink consumed for the human requirement of sustenance is not allowable. It does not matter that work occasions a greater appetite or causes greater expense. The expenditure is at best dual purpose. There is no mechanism to allow an apportionment to give a ‘business’ proportion or the ‘extra cost’ imposed by the business. The whole cost is disallowed.

[Weltchy]

Made even more confusing if you have just started a New Year diet and thus consuming much less calories.

It has to be said, I feel like writing a letter to the Editor of The Times about this thread. It's starting to make my blood boil...

Tell me about it. I'm currently calorie counting my way back to fitness, hence it would be easy for me to track Business Related Calories (BRC).

[Flubster]

Therefore, surely the difference in the number of calories consumed when at work as compared to when doing bugger all at home would be a quantifiable amount that could be classified as being solely for the benefit of the business.

Made even more confusing if you have just started a New Year diet and thus consuming much less calories.

It has to be said, I feel like writing a letter to the Editor of The Times about this thread. It's starting to make my blood boil...

[Weltchy]

I would have thought the very nature of having to go to work as opposed to staying at home and doing bugger all (On the bench) would lead to the conclusion that when at work, you would be required to consume more calories. Therefore, surely the difference in the number of calories consumed when at work as compared to when doing bugger all at home would be a quantifiable amount that could be classified as being solely for the benefit of the business.

[Bob Jones]

All I have done is to set out the strict legal position - how it happens in the real world it perhaps different but if a civil servant takes a packed lunch on an away day, then claims that a meal was purchased at a higher cost than normal and then claims meal allowance at the scale rate then that claim is false - the claim form completed by civil servants has words to the effect that false claims could lead to dismissal - which would possibly also include loss of pension rights and/or imprisonment.
In the real world I operate under my own limited company so I am hardly going to threaten myself with the sack - expenses paid by Umbrellas are not in addition to salary - the contractor will end up with the money anyway but not necessarily tax free (HMRC refer to this as salary sacrifice) so the Umbrella is hardly likely to threaten the contractor with the sack.
The crux is how the umbrella/limited company operates - what stipulations, if any, have been set out by HMRC on the granting of the scale charge and whether HMRC are prepared to turn a blind eye - they might have in the past - they might not in the future .....
It was obvious (to me at least) from the consultation document that HMRC want to do away with Umbrellas - that didn't happen but they have promised to use existing powers to look at critically at Umbrellas and the overall situation will be kept under review. Don't be surprised if the operation of scale charges is near the top of the HMRC hit list.....
Bob

[LisaContractorUmbrella]

That's a fair point. However, if ones dispensation allows you to claim a daily amount in food (whether it is brekkie, lunch and / or dinner), as long as it is within agreed limits, it should be claimable. I wouldn't expect a permie to be able to claim these as a business expense, but there again, they have other benefits that we dont get from the client.

A dispensation wont allow you to 'claim' a daily amount in food - a dispensation merely means that the expense will not have to be recorded on a P11D. The expense still has to be allowable and it still has to be incurred. If you don't incur and additional cost for food it cannot be claimed regardless of what the dispensation says

[TheFaQQer]

That's a fair point. However, if ones dispensation allows you to claim a daily amount in food (whether it is brekkie, lunch and / or dinner), as long as it is within agreed limits, it should be claimable. I wouldn't expect a permie to be able to claim these as a business expense, but there again, they have other benefits that we dont get from the client.

No - a dispensation means that you don't need to declare non-taxable expenses (in certain categories) on a P11D.

That doesn't mean that you can claim anything - e.g. my company has one for accommodation and subsistence, to an unlimited value. That doesn't mean that I can claim anything I want as subsistence, though.

Also, just because a company has a round sum agreement with HMRC, that doesn't mean that all expenses in that category are claimable - as Bob explained earlier.

Finally, why wouldn't a permie be able to claim them, if a contractor can? You are an employee somewhere, so why should the rules be different?

[pmeswani]

It's no different.

EVERYTHING is claimable. Whether there is a BIK implication (that you may or may not be aware of!) is a different question.

That's a fair point. However, if ones dispensation allows you to claim a daily amount in food (whether it is brekkie, lunch and / or dinner), as long as it is within agreed limits, it should be claimable. I wouldn't expect a permie to be able to claim these as a business expense, but there again, they have other benefits that we dont get from the client.

[TheFaQQer]

A friend of mine runs a reseller. When he goes and meets a client, he will buy some food on the way to the client (breakfast - if it is early), buys lunch (either alone or with the client) and dinner (on his way back). He claims the money back as expenses against the compan.y Why is this scenario different to being a contractor? I am curious.

It's no different.

EVERYTHING is claimable. Whether there is a BIK implication (that you may or may not be aware of!) is a different question.

[pmeswani]

Dang65 - it would really depend on your circumstances. If, when you worked abroad, you rented a flat then there really will be no additional cost to you for food as, to all intents and purposes, you would be in the same position as you are at home. However, if you stayed in a bed and breakfast or a hotel you would not have facilities to prepare food in your room and would have to eat out and therefore the cost would be a legitimate expense.

A friend of mine runs a reseller. When he goes and meets a client, he will buy some food on the way to the client (breakfast - if it is early), buys lunch (either alone or with the client) and dinner (on his way back). He claims the money back as expenses against the compan.y Why is this scenario different to being a contractor? I am curious.

[LisaContractorUmbrella]

Dang65 - it would really depend on your circumstances. If, when you worked abroad, you rented a flat then there really will be no additional cost to you for food as, to all intents and purposes, you would be in the same position as you are at home. However, if you stayed in a bed and breakfast or a hotel you would not have facilities to prepare food in your room and would have to eat out and therefore the cost would be a legitimate expense.

[dang65]

The allowance of the “extra” is impossible to apply in practice and HMRC will allow the total if extra has been spent (and of course the claimant holds a travelling appointment or is travelling to a temporary workplace) – it begs the question that if you are buying a few bits and pieces from a market stall you are not spending more than would otherwise have been the case – you cannot claim for eating – you can claim only for the extra amount spent on food where that is genuinely the case and that it is the duties of the employment dictate that extra is spent (as opposed to nature of the duties causing more to be eaten)

I'm currently working in Germany. When I work at home, or close to home, I have a pack lunch put together from the cupboard/fridge using stuff I bought from the supermarket with the week's shopping. When I'm working away from home I might buy a sandwich, a drink, some fruit or chocolate. How I'm supposed to calculate differences in costs I don't know. I've never thought about it in 8 years of contracting, and before that as a permie. I've always claimed travel, accomodation and food expenses when working away from home, and no one has ever questioned me about it, either as a permie, umbrella employee or via an accountant with my own ltd co.

There are people out there who will eat a full meal in a restaurant every day when they're away from home, and have a room service breakfast in the hotel each day, and they must put through enormous claims each month.

I'm not saying you're wrong in what you say. Just that it's common practise to claim such expenses, and alarm bells do not seem to ring anywhere when they are claimed. I definitely spend more when I'm working away than I do at home, and I work away from home in order to bring in money for the company. I always thought that's what such expenses were about and why they were justified.

[Bob Jones]

I have covered this briefly at http://www.contractoralliance.co.uk/...lowances.phtml I didn't want to go into too much detail as on the Contractor Alliance website I have tried to cover all aspects of travel expenses - the whole issue of expenses is complicated as it is – anyway - it is 100% right that we eat in order to live and not in order to work but if the duties of the employment dictate that more is spent than would otherwise have been the case then the "extra" is allowable. The allowance of the “extra” is impossible to apply in practice and HMRC will allow the total if extra has been spent (and of course the claimant holds a travelling appointment or is travelling to a temporary workplace) – it begs the question that if you are buying a few bits and pieces from a market stall you are not spending more than would otherwise have been the case – you cannot claim for eating – you can claim only for the extra amount spent on food where that is genuinely the case and that it is the duties of the employment dictate that extra is spent (as opposed to nature of the duties causing more to be eaten) .. in practice HMRC will allow the whole of the expenditure where that is the case.
Scale charges are amounts negotiated between employers and HMRC – but there is still the overriding rule that more has to have been spent than would otherwise have been the case.
My office is in Chester (true) – I buy a ready meal from the local supermarket £2.75 (true) and pop it in the microwave. On Thursday I am going to Ashford, Kent for a meeting (true) – say I buy a sandwich from the local shop - £2.50 – I can claim – nothing .. but say I go into a café and pay £5.50 – I can claim £5.50.
Say I am employed by an Umbrella on a 30 month contract – the Umbrella has a scale charge £6 for lunch - I buy a ready meal from the local supermarket and pop it in the microwave – I can claim nothing as the contract is in excess of 24 months – say I am required to visit another workplace for the day – 250 miles away – I buy a sandwich for £2.50 – I can claim – nothing - I have not paid “extra” … but say I go into a café and pay £5.50 – I have spent more than would otherwise have been the case and I can claim the scale charge of £6. It is NOT simply a matter of - I am away from home for the required period of time and therefore I am entitled to claim.
This is a copy of an article I wrote some time ago – scroll down to “receipts” and the following paragraph “practical effects” …. http://www.internet-taxation.co.uk/dispensations.htm

Regards

Bob