Can I Claim Meal And Travel Expenses?

HMRC allow you to claim business expenses incurred ‘wholly and exclusively’ for the purposes of your trade. Food and travel costs can be something of a grey area though, because your daily Tesco meal deal and regular commute to the office won’t qualify. Even if your meal deal is top tier.

But food and travel directly linked to business activities, such as client meetings, visiting a temporary workspace, or staying overnight for work, can (in most cases) be classed as a legitimate business expense.

Of course, everything has its limits so The Ritz and 5-star dining are off the cards. Soz. This article will explain when meal and travel expenses are classed as allowable business expenses.

What is a business expense?

If you’re self-employed, your business will inevitably have expenses that are essential for it to run. For example, if you make crochet handbags, you need to buy materials. You simply can’t operate without them.

If you’re a plumber, you can’t just turn up to clients’ houses without your tools or the job won’t get done. Unless you love unblocking toilets with your bare hands.

The good news is HMRC understand that businesses need to spend money in order to make it, so a lot of the necessary costs, like materials and tools, can be deducted from your taxable profit before you pay tax.

If you’re self-employed

A self-employed sole trader (or an individual in a business partnership) can deduct these costs off their taxable income. You pay tax on your taxable income rather than the total income, so this reduces the amount of income tax you need to pay when you submit your Self Assessment tax return.

If you are a director of a limited company

If you run a limited company, you’re not actually self-employed, you’re an employee of your business. Don’t fight us on this one, it’s facts.

Thankfully though, you can still deduct costs related to running your business from your company’s taxable profit before it pays Corporation Tax.

Can I claim food and drink expenses if I run my own business?

Day-to-day things, like lunch at the local café or matcha breaks in between meetings don’t count – and that’s because people need to eat and drink whether they run a business or not.

But if you were operating outside of working norms, such as going away to meet a client, you can usually claim for any reasonable food and drink costs.

Sole traders and limited companies follow broadly similar rules in this area, but subsistence expenses like food and drink are different.

A sole trader deducts food expenses directly from their taxable profits. But if you run a limited company, you’ll need to reimburse yourself from the business, and then it can offset the cost against Corporation Tax.

In both cases, the ‘wholly and exclusively’ rule still applies.

Claiming for food as a sole trader

So what does and doesn’t count if you need to claim food expenses and you’re a sole trader?

Claiming for food as a limited company

It’s worth noting employees and directors are treated similarly. So, if you employ members of staff, the list of what can and can’t be claimed as an expense also applies to them.

What counts as a travel expense?

Basically, any travel costs that are wholly and exclusively for business (apart from the normal commute to your usual workplace and back) are classed as a business expense – within reason.

It’s important to remember the ‘strictly for business’ part. Let’s say you’re a wedding photographer from Leeds working in London, and you’ve booked a hotel for two nights for work. You take your partner and kids, and made it a holiday. That’s now a personal expense, even though you’re also working. HMRC really believe in the saying ‘don’t mix business and pleasure’.

Otherwise, allowable travel costs for anything wholly and exclusively related to your business can include:

Restrictions on claiming expenses for a temporary place of work

This can get a little tricky – especially if you regularly travel to a client’s premises. If you take on a job and expect to spend more than 40% of the time there – then you can only claim expenses for up to 24 months. It’s known, very creatively, as the 24 month rule.

If you take on a contract which is expected to run for 35 months, it won’t be classed as temporary, and you’ll be unable to make a claim. But, if you have a contract which is 24 month long, and then at the end of the term it needs to be extended, the expenses are allowable. Just don’t try to be clever about it.

How do I claim for food and travel expenses?

Sole traders and limited companies operate a little differently when it comes to claiming for food and travel expenses.

How to claim for food and travel as a sole trader

If you’re a sole trader you can claim travel expenses directly against your self-employed income, reducing your taxable profits (yay).

You can’t pay yourself the mileage allowance – but you can either work out your claim using HMRC’s simplified flate rate, or by working out the exact costs of things like insurance and repairs, and apportioning them to your business usage.

How to claim for food and travel as a limited company

If you’re running a limited company, the company will either pay your expenses directly (such as buying your train ticket using the company card) or reimburse you for your travel expenses. This isn’t a taxable benefit – so the company gets corporation tax relief, and you (the director) aren’t taxed personally.

When it comes to mileage, your company can reimburse you (or your employees) at HMRC’s approved rate. Just remember that the excess is taxable if you decide to pay yourself more than the approved rate. You’ll pay income tax on the benefit’s value, and your company will pay employer’s National Insurance on it.

How much can I claim?

HMRC say these expenses much be reasonable for both food, drink and travel. So, whilst there’s no actual definition of this we highly doubt HMRC will sign off a four-night stay at The Savoy, drinking wines from every continent. But if you’re paying, our bookkeepers will be there.

Keeping records

It’s important, no matter your business structure, to keep records of all your expenses – and now Making Tax Digital has begun to roll out, finding compatible software (like Pandle) is essential. You’ll be ready if HMRC ever come knocking, and it makes life easier when it’s time to claim all those travel and food expenses on your tax return. We very helpfully explain the process of keeping good records in our beginner’s guide to bookkeeping.

The diagram below shows how recording your expenses correctly affects other areas of your business.

Learn more about using Pandle to make business accounting easier. Create an account today and decide what to do with all the extra time you get back.