Enjoying your food allowance as a self-employed individual: How to make the most of it

Did you know that if you eat out while working or stay overnight on a business trip, you can claim your expenses?

We've put together a short guide to walk you through everything you need to know about claiming your allowances.

As a sole trader, you'll be happy to know that there are circumstances where you can claim subsistence expenses.

What is subsistence?

Before talking about tax and food, let’s clarify what subsistence is. To Joe Bloggs in the street, it’s food to sustain you. However, HMRC offers a broader definition. According to HMRC, subsistence is as follows ‘subsistence includes meals and any other necessary costs of travelling, for example parking charges, tolls, congestion charges or business phone calls.’ Take a look at the website below for more information.

There are different rules for staff parties, or client entertainment, which you can have a look at here. The HMRC definition quoted above only applies only to food and drink consumed while you are working.

Who can claim subsistence?

Well, if you're self-employed, you're eligible! That includes independent contractors, sole traders, and proprietors. So, don't worry, you're in good company.

How does the allowance work?

All claims have to be reasonable and have been paid for while on business. There is no upper limit, but you have to be able to justify the claim to HMRC if needed.

We will ask for receipts as evidence of the subsistence, especially if it’s a significant amount. It’s good practice to save a receipt in your software or accounts file anyway and more so for subsistance. It's crucial to have evidence of your spending and prove that these expenses were for work-related purposes. HMRC can ask to see your records for up to six years after filing a return and so paperwork is vital to all expense claims.

It’s all about balance and reasonableness. You can eat at the Ritz while working in town, but if there was a cheaper option available to you then it is expected that a cheaper decision should have been made, and so a Ritz claim is likely to fall foul of the rules and be rejected.

Sometimes claiming for a sandwich while you are out on a work meeting can see like an admin headache for no real benefit. However, it is worth claiming your expenses and subsistence as the overall effect is a reduction in your tax bill. So it is a good idea to add all those small subsistence claims. What this means in practice is if your sales were £40,000 for the year, and your expenses were £5,000 then the taxable profit left will be £35,000. You won't get a direct reimbursement, but your tax burden will be lighter. Every little helps, as they say.

When to Claim Self-Employed Subsistence Allowance

Knowing when you can claim your cake using the self-employed subsistence allowance has been a bit of a puzzle. HMRC has had some interesting cases taken through the courts which help to give us some guides on what they will and won't accept.

One case is Caillebotte v Quinn [1975] 50 TC 222 – when can you claim subsistence?

This case is the go-to authority for disallowing the cost of subcontractor lunches. It mainly applies when subcontractors have a consistent work pattern that involves travelling to different sites within a small radius of their homes. In these situations, sorry to say, the cost of lunches can't be deducted as an expense. And here's the kicker: this rule even applies when the subcontractor's "business base" is their own home address.

Another is Prior v Saunders [1993] 66 TC 210

Now, let's talk about another case that follows similar principles. In Prior v Saunders, the expenses of a subcontractor who worked away from their "home base" for a prolonged period were also disallowed. This just goes to show that the disallowance of subsistence costs can extend to scenarios where subcontractors work in specific areas away from their usual business location.

Deductible Overnight Subsistence Costs

So we've covered when lunch expenses are a no-go. But here's the good news: if subcontractors are required to cover the costs of overnight subsistence while working away from their business base, reasonable expenditure on accommodation and subsistence should not be objected to. That means you can allow those costs without a hassle. And don't worry, the reasonable cost of a meal, whether it's enjoyed at the accommodation or nearby, should be deductible too. The key is 'reasonable'.

Additional Guidance

For even more detailed guidance on subsistence costs and meals related to overnight business travel, you can check out BIM37670. This resource is jam-packed with valuable insights that'll help you navigate the ins and outs of managing these expenses more effectively.

HMRC will always refer back to these guides so it is worth having a read through if you are in doubt on a claim.

Overnight Business Travel

If you're a sole trader who occasionally has to stay away from home overnight for business purposes, the good news is that you can claim reasonable expenses for accommodation and subsistence. This means that when you're working outside your normal business area and incur necessary costs for food and lodging, you can deduct them as valid business expenses. So, whether you're enjoying a meal at your accommodation or dining nearby, you can claim the cost of that meal too, as long as it's reasonable.

Day Trips and Lunch Costs

Now, let's move to day trips and lunch costs. Unfortunately, as a sole trader, you can't claim for the cost of your lunch when you're working at your regular business location or within your local area. HMRC considers these costs as personal expenses. However, if you're on a day trip and have to travel outside your normal business area, you can claim reasonable subsistence costs for food and drink during that trip. Just remember that the expenses must be necessary and directly linked to your business activities.

Seeking Professional Guidance

As a friendly reminder, navigating the complexities of HMRC rules can sometimes be tricky. If you're ever uncertain about what you can claim or need assistance in understanding the regulations, don't hesitate to seek professional guidance. We love a HMRC guide and are always happy to have a look at a query and ensure you're making the most of your legitimate subsistence expense claims.

We hope this guide has shed some light on when sole traders can claim subsistence expenses under HMRC rules.

Always remember, staying informed and documenting your expenses accurately will help you benefit from the allowable deductions and ensure a hassle-free experience during tax time.

Cheers to running your sole trader business successfully while making the most of your legitimate expense claims!

Photo by Louis Hansel on Unsplash