Allowable expenses for self-employed -little things like lunch

[Wowee]

Can you tell me what you do, regarding these matters.

My stance has always been that things like a lunchtime sandwich don't count as an allowable expense (cos you would have some lunch whatever), whereas dinner/breakfast on an overnight hotel stay do.

Someone has asked me to sort out his books, ready for his tax return. He's planning to claim for every morsel that passes his lips, including breakfasts when he sets off from home before 9:00 a.m., a bottle of water he bought whilst waiting for a flight, and several petrol-station sandwiches a week.

His view is these should be VAT -reclaimable (where VAT is paid), and all should be allowable expenses.

 

[David Griffiths]

Can you tell me what you do, regarding these matters.

My stance has always been that things like a lunchtime sandwich don't count as an allowable expense (cos you would have some lunch whatever), whereas dinner/breakfast on an overnight hotel stay do.

Someone has asked me to sort out his books, ready for his tax return. He's planning to claim for every morsel that passes his lips, including breakfasts when he sets off from home before 9:00 a.m., a bottle of water he bought whilst waiting for a flight, and several petrol-station sandwiches a week.

His view is these should be VAT -reclaimable (where VAT is paid), and all should be allowable expenses.

Then he's going to be very unhappy.

Not allowable because it's not wholly and exclusively for business

Start here

Loads more here

 

[Wowee]

Thanks David, that's exactly the type of Info I need.

I've tried to explain it, but he shouts me down each time. He claims that he knows an accountant who used to be a tax inspector, who said she would let these things thru' no problem.

I asked if he would prefer she did his books.... Apparently her rates are more than mine..

 

[Tom McClelland]

Hmm, while I think there should be limits (and I don't have a lot of sympathy with claims for petrol station sandwiches) it seems to me that those HMRC pages are overreaching. They seem to be trying to imply that no food consumed anywhere, under any circumstances, would be allowable because you have to eat to live.

What about working lunches, where the PAs bring in a platter of sandwiches and fruit? Should they be declared as a taxable benefit in kind for all the people in the meeting because the eating isn't wholly necessary to conduct the business of the meeting? On the face of it that seems absurd and I've never heard of anyone doing that.

By a similar argument to that which HMRC is trying to push, since a comfortable bed for a night's sleep is a requirement for living you shouldn't be able to claim for hotel accommodation when you're away either. You chould choose to find a park bench or sleep in your car without necessarily affecting your work!

Isn't the test whether or not you had to buy the food away (at greater expense than would otherwise have been the case) because of the requirements of your job?

I'm not arguing with the professionals; I'm just astonished at the absolute prohibition that seems to be implied in those pages about food as a business expense. I only hope that if it's true, that when the HMRC payroll accreditation people visit 12Pay they're declaring the lunch that we give them as a benefit in kind. (yeah, right)

 

[Zeno]

I've tried to explain it, but he shouts me down each time. He claims that he knows an accountant who used to be a tax inspector, who said she would let these things thru' no problem.

That is one of my all time pet hates. The "expert" who knows so much better than you but for some reason or other is unable to do the job.

All he needs to do now is mention "my mate down the pub who pays no tax at all..." and you are legally entitled to beat him to death with a Tolleys tax guide.

 

[David Griffiths]

Isn't the test whether or not you had to buy the food away (at greater expense than would otherwise have been the case) because of the requirements of your job?

The whole basis of the test case of Caillebotte v Quinn was that Mr Quinn claimed that it cost more to buy his sandwiches when he was working away from his base (which just happened to be his house) and the case was thrown out on the wholly and exclusively test.

The Revenue are normally happy to allow reasonable costs of a meal incurred in connection with an overnight stay.

They've also recently introduced "benchmark" rates for people working away from their normal place of work for a minimum of 5 hours - link here It's not clear if this applies to the self employed, rather than employees (and I suspect that it doesn't) or to people who are regular site workers.

Most of us who work in offices either bring lunch or buy sandwiches, and there's no real additional cost if you have to buy them somewhere else. Many (most?) employers these days don't allow a claim for the cost of lunch, but will allow for dinner.

 

[Maslins]

What about working lunches, where the PAs bring in a platter of sandwiches and fruit?

These are generally ok as (the argument goes) the food is "merely incidental" to the training session/whatever you want to call it.

As your example with the bed, I think the question is what would the cost have been had you not been away. It costs you nothing to sleep in your bed at home (ignoring pedantic comments about extra washing etc) but staying in a hotel is fairly expensive. If you are staying away in a hotel because that is where the client is then that hotel cost is entirely created for business purposes.

But, as an example, when I attend a breakfast meeting and on top of the annual membership fee it costs £10 for the breakfast, I'm putting that down as a business expense. My bowl of cereal at home costs pennies and by far and away the main reason for me being there is the networking, the breakfast isn't even that nice!

If challenged, I would use the "merely incidental" argument. Whether I'd succeed or not is another matter...

 

[Tom McClelland]

Both of those responses sound practical to me, and they match what I thought to be the case. So it does seem that the statements made on the linked pages HMRC website are considerably overreaching when they try to imply that food for sustenance would never be an allowable deduction.

 

[Maslins]

HMRC guidance is very handy, but do bear in mind who it's written by!

The guidance is their interpretation of the law, which obviously leans in their favour on contentious issues.

In short, don't take the p!ss and you'll probably be fine.

 

[Simonhatfield]

Are there any limits to what is reasonable to spend on meals, hotel rooms etc.

If I head to London for a conference, can I eat in a Gordon Ramsey Restaurant for £120 per person and stay at the Mandarin Oriental Presidential Suite at £1000 + per night or would that seem excessive?

I have always wondered? Is it just a case of judging it dependant upon your turnover/profit. For example if your Turnover was £10 000 a year and you spent 10% of it on a hotel for a conference, that would be excessive. Where as, if you turned over £1 000 000, then spending £1000 - 0.1% is reasonable?

I travel significantly with my businesses, and although don't claim lunches etc, will claim evening meals and for hotel rooms.

Simon

 

[graemepirie]

Both of those responses sound practical to me, and they match what I thought to be the case. So it does seem that the statements made on the linked pages HMRC website are considerably overreaching when they try to imply that food for sustenance would never be an allowable deduction.

Maybe they need to pop into Parliament with their "benefit in kind" bills for the £400 a month those theiving gits called "honorable members" claim for food!

 

[Wowee]

Maybe they need to pop into Parliament with their "benefit in kind" bills for the £400 a month those theiving gits called "honorable members" claim for food!

One of the reasons we got soooooo very ANGRY about that is that the MPs are treated so very differently to the rest of us over this type of thing.