If my understanding of the EIM is correct, free or subsidised meals provided to all employees in a canteen and even not in a canteen (provided it is at the work premises) are exempt from any further tax or NICs to both the employer and the employee. Therefore, is it allowable for a Limited Company which consists of directors only and no other employees to deduct the cost of providing meals to the directors in the workplace? If so, presumably a husband and wife Ltd Company being run from home could legitimately deduct the cost of providing free meals to themselves at home (as it is in the workplace)?
It strikes me that the 'wholly and exclusively' rules would get in the way of doing this but I can see no reference to this in the benefits code.
Even if a small company does have other employees, so long as free or subsidised meals are offered to them too (but not part of a salary sacrifice scheme), the directors could still enjoy free meals every day, paid for by the company and tax deductible for the company. I suppose it may come down to what constitutes providing free meals. In the case of a small husband and wife team with two employees, let's say that the directors prepare the food themselves onsite (eg sandwiches, toast, soup, drinks etc) and offer it as free meals to all staff, would this count? I feel it would. So would it still count if the company consists of just one or two directors only?
If the directors prefer to eat sandwiches and drinks prepared by someone else, I would think that food delivered by a caterer or sandwich van to the place of work, to be offered to all staff at the work premises would also be allowable. In fact HMRC give a similar example of this at EIM21673:
A small company has three directors and two employees. Twice a week they all have a working lunch together in the office at which they brainstorm new ideas. The lunch is on a reasonable scale and paid for by the company. Every second Friday they go to the pub at lunchtime to discuss over a pub meal how the business is developing. The meals and drinks are paid for with a company cheque.
Section 317 applies to the working lunches in the office because all the employees may get a free meal on the employer's premises. But Section 317 does not apply to the pub meals. They are not on the employer's premises or in a canteen where meals are provided for staff generally.
Of course if there are employees, to be truly tax efficient, the cost of providing meals would need to be taken into account when staff are taken on and what level of remuneration is offered to them. But provided all staff are treated the same and it is not part of a flexible remuneration arrangement, this would be fine, and the staff may not even take up the offer of free meals!
Any guidance much appreciated as I feel I may be missing something here!
Replies (5)
Please login or register to join the discussion.
It seems to me the legislation criteria are met if the home is 'the employer's business premises'. However, if you you work from home and the company is not charged rent, then I don't see how the premises can be the employer's?
S317 ITEPA 2003
No liability to income tax arises in respect of the provision for an employee by the employer of free or subsidised meals if they are provided–
(a) in a canteen, or
(b) on the employer's business premises,
and conditions A to D are met.
(2) Condition A is that the meals are provided on a reasonable scale.
(3) Condition B is that all the employer's employees or all of them at a particular location may obtain one or both of the following–
(a) a free or subsidised meal, or
(b) a free or subsidised meal voucher or token.
(4) Condition C is that if the meals are provided in the restaurant or dining room of a hotel or a catering or similar business at a time when meals are being served to the public–
(a) part of the restaurant or dining room is designated for the use of employees only, and
(b) the meals are taken in that part.
(4A) Condition D is that the provision is not pursuant to–
(a) relevant salary sacrifice arrangements, or
(b) relevant flexible remuneration arrangements.
We do it
No such thing as a free lunch - but a tax subsidised one, sure!
Actually, we mostly do staff breakfast here. For some reason we all have brekkie when we come in to work most days.
To clarify...
And to clarify, I did breakfast and lunch when I was a sole director in an office.
Now I have staff, I do staff breakfast but not lunch, though any food in the kitchen (read:canteen) is available to everyone, which might sometimes be lunch too.
If working from home (and even if in an office) I'd have documentation in place to clarify the situation should HMRC come a'knocking...