Are Company-Provided Employee Lunches Taxable?Written on February 26, 2015 by Kirk Rice LLP
Taxing Times QuestionsThe Question:
Every month my company holds a staff meeting during a lunch period and I provide lunch for everyone. Are there any tax issues with this?
Kirk Rice LLP answers:
Sometimes you might pay for staff or directors to eat whilst they’re at work. The trouble with this is that HMRC considers it to be a taxable benefit-in-kind. But luckily there’s a way to avoid this trap.
Taxable benefit
Targeted. If HMRC carries out for a PAYE audit visit, you can expect him to review your staff costs. One of the things they will look for is the cost of staff lunches. Unless these meals are provided for all employees (although not all of them have to take them up) then this can result in a tax bill for those enjoying the free lunch.
Exceptions to the rule
Nevertheless, there are some examples of circumstances where no tax liability would arise: (1) in the course of negotiating a renewal or alteration of a service contract; or (2) 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 does recognise that there are occasions in which food is genuinely second place to the work in hand. He accepts that free or subsidised meals may occasionally qualify as a business expense This is a “wholly and exclusively and necessarily condition”, so the point you need to demonstrate to HMRC is that social and personal considerations play no part in the coming together for a meal.
Warning. If a meal is provided to reward just a few staff who have worked late into the evening, it is still potentially taxable.
What to do
There seems every reason to try to claim a deduction for lunches where the business element clearly outweighs the social side. 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 hours for these sessions they provide sandwiches etc.
If staff are expected to attend the meeting, and there is some genuine technical or other business related session in progress, it’s difficult for HMRC to currently argue that the occasion has any social aspect at all.
Catering to different tastes? Further, you don’t have to provide all employees with the same meal in order to qualify for exemption.
If you would like more advice regarding this issue or any other tax matter, please contact us.
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Please note: answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made.
Correct on 4 April 2018
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