Tax treatment of lunches provided to your employees

There might be occasions when you pay for your directors and staff for 'working lunches'.  In some circumstances these might be considered a taxable benefit in kind by HMRC. It's therefore important to understand the tax treatment of lunches provided to your employees

Tax treatment for lunches provided to your employees

Tax treatment of lunches provided to your employees - HMRC's view

HMRC's view is the correct tax treatment of lunches provided to your employees is one that produces a tax liability!

Their internal guidance states 'that any meal taken with a work colleague is always likely to be predominantly related to social and personal considerations'. They are therefore likely to view staff meals paid for by the company as potentially entertaining expenditure. Therefore this expenditure would not an allowable expense for the company and a taxable benefit in kind for the employees concerned.

Are there any exceptions to this rule?

HMRC do cite several examples where the provision of a  meal to an employee might not result in a tax liability. These are in the following circumstances:

  • Where this is provided in the course of negotiating a renewal or alteration of a service contract
  • On the occasion of a 'briefing visit'. When local staff are detained beyond normal hours to fit in with a visit of a head office controller 

So HMRC do accept there are situations where food is genuinely a secondary consideration to the work at hand. They acknowledge that free or subsidised meals may occasionally qualify as a business expense where it is wholly, exclusively and necessarily incurred.

So to obtain favourable tax treatment you'll must demonstrate to HMRC that social and personal considerations play no part in coming together for a meal. Be aware that providing a meal to staff as a reward  for working late into the evening is still potentially taxable.

Obtaining favourable tax treatment of lunches provided to your employees

It's perfectly acceptable to claim a deduction for lunches where the business element clearly outweighs the social aspect. For example, companies can and do run in-house staff training/briefing sessions during a lunch break. To encourage staff to give up their lunch break, food is provided as an incentive.

If staff are expected to attend a meeting for a genuine technical or other business related matter it's difficult for HMRC to argue a social aspect is involved. If you've ever attended a lunchtime technical tax update course you'll know exactly what we mean!

What's more you don't have to provide employees with the same meal in order to obtain an exemption. So you could provide the directors with whatever suits their tastes and give the other employees luncheon vouchers or bowls of fruit.  Additionally if you provide subsidised coffee and biscuits for all staff you are probably technically within the exemption already.

For more useful information, check out our Ebooks here.

And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].

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