Evening Meal Quid Pro Quo - can you claim as evening meal allowance?

Evening Meal Quid Pro Quo - can you claim as...

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Client is a Director of a Ltd company and stays away from home often in the course of business.  If they ate a meal on their own, they would claim for this meal as they were away from home & on business.  However, the clients like to keep the director company as they are polite and will discuss business as well.  One night the client pays, the next night the Director pays.  

1 - Is the expense deemed to be business entertainment?  My first thought is that it isn't because the meal would have been allowable otherwise?  But I'm sure HMRC have taken a different view in the past

2 - If they split the bill and got separate invoices would the Director's cost be allowable?  

Many thanks

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By cfield
02nd Dec 2013 15:59

No splitting allowed

If the director pays for both himself and his client, and the main purpose of the meeting is to discuss business, not keep him company, then it is all business entertaining and hence disallowable for the company (for both corporation tax and VAT).

That's because his presence is required for the entertaining. Any food or drink the director consumes himself is incidental to that main purpose. Therefore, you cannot split it between subsistence and entertaining.

If the main purpose is social, then it counts as subsistence (provided it is reasonable) but only for his own share of the bill. If he pays for the client too, it should come out of his own pocket. If the company pays, then it should either go through the payroll as earnings or be debited to his loan account.

If he stays at a hotel at the company's expense, it is only tax free if it's because it is too far to go home at that time of night or public transport has ceased or it is not reasonable/safe for him to use at that time of night.

You can't just claim hotel bills because you don't fancy going home, or you're too drunk to call a taxi (or they won't let you in the cab as they think you might vomit everywhere). I don't mean you personally here by the way! By "you" I mean anyone.

In that case, it would be a benefit-in-kind (if the bill is in the company name) or a payroll item (if the bill is in your name). For this purpose, it makes no real difference whether you pay the bill yourself and claim expenses or use a company card.

If his hotel stay is tax free as above, he can claim reasonable subsistence (evening meal) plus £5 per night for incidental expenses. Drinks with the meal are allowed (if not excessive) but drinks at the bar must be covered by the £5 overnight rate (over the whole length of his stay).

If there really was business entertaining going on, then the bar bill can be attributed to that instead. Provided it was reasonable of course - you are not allowed to have a skinful at the taxman's expense just because you have files in front of you.

Corporate events are different. Then you are allowed to have a skinful provided you are entertaining people who are there by reason of their business relationship with the company, not you personally.

A bit chapter and verse all this, but hopefully covers all scenarios!

Thanks (1)