Can you claim the cost of food and meals as a limited company expense?

It is simple enough to ask whether food and meals can be accounted for as expenses in a limited company’s accounts, and the short answer is that sometimes they can.

The longer answer is a little less straightforward, and an accountant or tax adviser may open their reply with a frequently used but rather infuriating “Well, it depends…”.

The next question, of course, is, ” It depends on what exactly?”

In this guide, Christian Hickmott, Managing Director of Integro Accounting discusses this frequently asked question:

Given that, under the right conditions, you may be able to claim back the VAT and reduce your corporation tax bill by including spending on meals and food in your accounts, it is well worth taking the time to get the facts right in this area.

Let’s start by looking at the reasons why you may wish to include the cost of food and meals as company expenses, and from there we can start to make sense of the different rules in this area.

Broadly speaking, there are three main categories where you may be spending on food and meals and wonder whether it can be treated as a business expense:

• food for yourself during a working day;
• meals for clients in a business entertaining context;
• food and meals for employees.

We will examine the first category here, which involves paying for your own food and meals through a limited company.

Can I claim the cost of my own food and meals through a limited company?

When establishing whether you can claim the costs of food and meals that you have incurred through your limited company, there are three main concepts to keep in mind.

Firstly, HMRC has long argued that we have to “eat to live,” and it would be very hard to argue against that fact.

What they mean by this is that we as individuals must find some way of nourishing ourselves throughout the day regardless of what we are doing with ourselves that day.

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Eating lunch, for example, is not something that happens as a result of the work you’re doing – it happens because you’re a human, and humans need to eat.

This means you ordinarily cannot claim your usual daily food and meal expenditure through your limited company.

Just as an employer expects their employees to organise their own lunches each day, your employer (aka your limited company) expects you to pay for your lunch personally.

There is an exception to this rule, and that is when you incur costs that are outside of your business’s day-to-day arrangements.

For example – you usually work from home near Birmingham but have meetings lined up in Newcastle or Edinburgh.

You might incur some costs outside of the usual for that day, such as a train ticket, plane ticket, or overnight stay.

In these circumstances, claiming lunch and even an evening meal is acceptable, even if you were to return to your home that night at a very late hour.

When working out what you can spend in these circumstances, we turn to the next two of the three concepts mentioned above.

Is the cost wholly and exclusively for the purpose of business?

Costs incurred in these circumstances must be “wholly and exclusively for the purpose of the business”.

“Wholly and exclusively” means, for example, that you cannot combine it with socialising with someone unrelated to the reason why you were there on business in the first place.

This means, for example, that if you choose to catch up with a friend over a meal before making your long journey home, you would not be able to pay for that meal through the business, as you have combined it with a personal engagement. T

his is regardless of whether, without meeting your friend, you would have eaten the same meal, in the same place, at the same time – the presence of the friend means that the cost does not pass the test of being wholly and exclusively for business.

Is the expenditure unduly lavish?

The other requirement in these circumstances is that the expenditure must not be “unduly lavish”.

This is not to say that you can’t go to a local artisanal bakery to source a freshly made sandwich for your lunch, which may indeed cost twice as much as a sandwich from the local supermarket. However, it does mean a three-course meal at a Michelin-starred restaurant would be off the cards.

You may feel that this is all a little vague and subjective, and yes, you would be absolutely right.

However, if you take a step back and apply fairness and common sense to the above rules instead of adopting a “what can I get away with” mentality, you will not go far wrong.

A good habit to get into is noting why you have included certain expenses (something that can easily be added in most bookkeeping software).

If asked, you can demonstrate that you have thought things through and applied the rules in good faith.

Another good rule of thumb is to ask yourself whether an employer would pay the expense to an employee on their payroll.

After all, as mentioned above, you are employed by your own limited company.

Find out more in our guide to claiming limited company expenses.