Can I have a Tax Free Lunch? 6

Business People Having Meal Together

Let’s look at the options….

Exemption for Canteen Meals

Employees can be provided with free or subsidised meals provided generally to employees served on the business premises where the following 3 conditions are met:

  1. The meals are provided on a reasonable scale
  2. That all employees or all those at a specific location may obtain free or subsidised meals
  3. If the meals are provided in a restaurant or hotel at a time when meals are being served to guests/clients part of the dining area is designated for employees

Not everyone needs to use the facility they just need the option to use it and its is possible for senior management to have superior meals.

This exemption is not available where only select employees are able to get a free lunch.

HMRC are happy to accept Tea and Coffee as trivial benefits that can be ignored.

Benchmark Subsistance

Since April 2009 employers have been able to pay their employees HMRC approved flat rate allowances referred to as Benchmark Subsistance, the rates are:

  • £5 if you buy a breakfast and start your business journey before 6am
  • £5 if you’re out of the office on business for more than 5 hours, and buy one meal
  • £10 if you’re out of the office on business for more than 10 hours, and buy 2 meals
  • £15 if your business trip keeps you beyond 8pm, and you buy an evening meal

So £15 is the maximum

You can only claim if:

  1. travel is required as part of your dutues or you are working at a temporary work place
  2. you are away from your work place or home for more than 5 hours
  3. you are expected to pay for food and drink after starting your journey

Meal Vouchers

Vouchers can be issued tax free but only up to the value of 15p per working day and the voucher must be non-transferable and used for meal only.

Travel Expenses

I have separate blog on this topic https://stevejbicknell.com/2013/02/13/what-travel-expenses-will-the-taxman-allow/

steve@bicknells.net

What Travel Expenses will the taxman allow? 13

Passport with diary open on expenses page

Apart from Business Mileage, what can you claim and what counts as a business trip?

Assuming your employer or supplier or customer aren’t reimbursing your costs….

If you’ve got to make journeys for business purposes you can deduct your travelling expenses from your taxable income – so you’ll pay less tax.

In addition, there is no restriction on the standard of travel and accommodation, provided the main purpose of the trip is that of business, you can travel first class and stay at the best hotels.

But what if the trip is partly business and partly pleasure, in this case you will need to apportion the costs and only claim for the business element.

What are business journeys (HMRC definition)

You can only get tax relief on the cost of business journeys. These are when, as part of your job:

  • you have to travel from one workplace to another – this includes travelling between your main ‘permanent workplace’ and a temporary workplace
  • you’ve got to travel to or from a certain workplace because your job requires you to

But business journeys don’t include:

  • ordinary commuting – when you travel between your home (or anywhere that is not a workplace) and a place which counts as a permanent workplace
  • private journeys – which have nothing to do with your job

If you’re not sure if a place you travel to counts as a permanent workplace telephone HM Revenue & Customs for advice.

Travel expenses include the actual costs of travel and also the subsistence expenditure and other associated costs that are incurred as part of the cost of making the journey.

The cost of business travel includes

  • the cost of any necessary subsistence costs incurred in the course of the journey
  • the cost of meals necessarily purchased whilst an employee is at a temporary workplace.

If an overnight stay is needed then the cost of the accommodation and any necessary meals is part of the cost of business travel. Even where an employee stays away for some time and the travel expenses are deductible, the cost of meals and accommodation is part of the overall cost of the business travel.

Travel expenses that qualify for relief

You can get tax relief on the necessary costs of business travel like:

  • public transport fares
  • hotel accommodation
  • meals
  • tolls
  • congestion charges
  • parking fees
  • business phone calls, fax or photocopying costs

But you can’t get tax relief for things that aren’t directly related to the business journey.

So far so good, but what about…..

Alcohol – claiming for a few drinks with your meal will be fine but other than with meals they would generally be considered a personal expense

Your Family – if you take your wife, husband or partner on a business trip their costs will be taxable unless they are on the trip for a business reason

Newspapers, Laundry and Phone Calls Home – HMRC allow claims for incidental overnight expenses up to £5 per night in the UK and £10 per night outside the UK

Learning the Lingo – no you can’t claim for language lessons

Staying with Friends – until 2009 HMRC were happy to agree a scale rate of £25 per night but now its based on actual costs

Basically, before you claim, stop and think, can you justify the expense as being a business expense for business purposes.

steve@bicknells.net

HMRC get tough on Travel and Subsistence 4

Many employees claim travel and mileage expenses:

Travel expenses that qualify for relief

You can get tax relief on the necessary costs of business travel like:

  • business mileage allowances for cars, cycles, motorcycles
  • public transport fares
  • hotel accommodation
  • meals
  • tolls
  • congestion charges
  • parking fees
  • business phone calls, fax or photocopying costs

But you can’t get tax relief for things that aren’t directly related to the business journey – like your newspaper or private phone calls.

Even if your employer doesn’t pay you the expenses you can still claim tax relief

https://stevejbicknell.wordpress.com/2011/12/20/how-to-claim-tax-relief-for-employment-expenses/

https://stevejbicknell.wordpress.com/2011/12/19/tax-refund-for-business-mileage/

Temporary Workplaces and Working from Home

The HMRC rules are set out at http://www.hmrc.gov.uk/manuals/eimanual/eim32000.htm

There is a 24 month rule for a temporary workplace and examples of working from home, these situations are common to Construction Workers, Agency Staff, Consultants, Drivers and Owner Managed Businesses where their home is their office.

Most people have been quick to assume that all their mileage from leaving home is business mileage and they feel entitled to claim for drinks and meals whilst working away from home, many businesses even agreed dispensations for meals of £5 to £10 with HMRC so they didn’t need receipts.

Some organisations tried to use Salary Sacrifice to swap salary for expenses to reduce PAYE/NI.

HMRC v’s REED

Specialist recruiter Reed has spoken of its ‘extreme disappointment’ after losing a £158million battle with the taxman over footing the travel and subsistence bills of temporary job candidates.

Dished out by the staffing company’s agents to 500,000 temporary workers between 1998 and 2006, the daily payments covered lunch – up to £6, and commuting – up to £11.45.

They were meant to be part of a salary sacrifice arrangement – where temps forego some of their salary for such perks, but it has emerged that no real agreement was in place for the six 12-month periods to 2006.

This is because HM Revenue & Customs has successfully argued that the employed temps were engaged under a series of job-by-job contracts and not, as Reed says, under a contract that continued (as an employment contract) following the end of an assignment.

http://www.contractoruk.com/news/0010392hmrc_defeats_reed_158m_temps_tax_case.html

It’s not just REED

Take a look at this Blog on Accounting Web http://www.accountingweb.co.uk/anyanswers/self-employment-travel-and-subsistence-issue-compliance-office

This Blog is about a construction worker working 200 miles from home and claiming travel, accommodation and subsistence. HMRC are seeking to disallow these expenses.

Do you have any advice or comments to share?

Has your business been affected by this issue? What happened? What were circumstances? How did you ensure compliance with HMRC rules?

 

steve@bicknells.net