Hi!
I have just had a meeting with a client and due to the nature of his business he is required to be away from home to meet potential clients and brokers. He has given me receipts Inc. costs for lunch for him and these people to put through his books. I just want to know if these would be allowed on a tax return or if they are entered as a
personal expense, therefore just reducing the capital at the end of the accounting period.
I have read on some chartered accountants websites that such expenses are allowed, but as far as I was aware this is not true and they cannot be used to reduce a tax bill.
Many thanks
Stacey
Would say these come under the heading entertainment and cost of potential clients/brokers lunches are definitely not allowed.
Not sure about your own clients lunch (as this may come under subsistence) but if he has the lunch with potential clients/brokers then would say this comes under entertaniment and not allowed.
due to the nature and timing of such expenses it sounds as though in this specific case they are a genuine entertaining clients expense of the business rather than a personal expense so will be included in the accounts as such.
However, except in certain circumstances involving overseas clients the expense is not allowable for tax purposes and like such things as depreciation the entertaining should be added back during the tax computation.
When reading articles over on accounting web (assume that's where you meant when talking about chartered accountants?) you have to be very wary of the exact wording of the question. There are some very, very clever people over there and it's all too easy to pick up on an answer assuming that your question fits it where such is very often not the case.
Note that if it was a case the the director was simply buying lunch whilst out of the office that would not be an allowable expense and be recorded as personal expenditure.
I had a discussion related to this subject a few days back but can't remember in which thread. I don't have a lot of time at the moment but if you have a scan back over the last weeks posts there's one where Semsley and myself had a little debate about HMRC's stance on this.
At the end of the day it all comes down to the fact that the client would have needed to eat anyway regardless as to whether they were on business so why should HMRC subsidise that. Entertaining clients is slightly different but in general still not allowable.
If I get chance later I'll have a dig around and post the link to the other post in here.
kind regards,
Shaun.
P.S. edited because of my complete inability to spell. Just wish my misspelling did not keep coming out as real words (they instead of the, thinks instead of things, etc.).
-- Edited by Shamus on Wednesday 8th of June 2011 01:46:40 PM
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
- If the payment for food include someone else who is not the sole trader, thier employee or sub-contractor its "Entertainment". This of course is not allowable for tax purposes. - If the payment for food is only for the sole trader, their employee or sub-contractor it could be "susbsistence". This would be allowable for tax purposes.
Subsistence can only be claimed if the Sole trader was away for the "office" and it was not practicable to return to the office or home due to the distance and had to incur additional costs due to the distance away, but chosing not to return (for reason of convenience) does not qualify as subsistence.
As the others say, its a bit of a minefield - especially lunch. Breakfast or evening meal as subsistence is a lot easier to claim/justify as allowable. The clients I have that have no problems claiming lunch tend to be couriers as they are usually driving distances away from home/office or sole traders working a long way from home/office normally for only a single day.
I would struggle to justify your clients "lunches" as subsistence unless it was for say a business networking meeting - and of course it could not include paying for anyone else - even a potential foreign client. That would be considered entertainment, simply because it included someone else.
-- Edited by YLB-HO on Thursday 9th of June 2011 11:11:43 PM
