EXPENSES • 13 AUGUST 2021 • 10 MIN READ

Fancy a cuppa and a bite to eat?

SECTIONS

Sole traders / partnerships

Shareholder employees

Other travelling costs

Conclusion

Who are Beany?

Chances are that your business won’t be paying, and you’re not going to like it.

Inland Revenue recently issued an Interpretation Statement (IS 21/06) on the deductibility of meals during the day and while travelling for business purposes. Inland Revenue believes this part of the legislation hasn’t been correctly followed in the past. It’s therefore not a new law, but explicit instructions on how existing law must be applied.

Inland Revenue considers meals to be a necessity for living rather than for earning income based on business structures.

Sole traders / partnerships

No food or drink can be claimed as a business expense. Not even if you’re away on business, staying at a hotel overnight or many nights, or attending a conference
The only situation where meals/drinks can be claimed as a business expense is when you are ‘entertaining’ suppliers, wining and dining (potential) clients, holding staff functions, etc. These fall under the entertainment guidelines, where only 50% of the cost is deductible
There are no exceptions to the above* – it’s black and white. You’re expected to pay for meals yourself and/or take a paper-bag lunch and a thermos to work

* Well…perhaps one. The only way a sole trader or a partner can claim meals with accommodation is if there are no self-catering motels available, and no supermarkets in the area. Even then, the amount claimed can only be the difference between the actual cost and what it would cost for you to have a meal at home. Good luck working that one out!

Shareholder employees

You’re in exactly the same position as sole traders and partnerships above, with one exception – your signed employment agreement requires that your employer (the company) reimburse you for meals and drinks, or provides you with an allowance. Of course, what is an exception without strings attached?

The cost needs to be incurred when you’re away from your normal place of work for business purposes
The reimbursement must be reasonable and in line with the company’s agreements with other employees. For example – you can’t have an elaborate meal with expensive wine, while other employees are limited to a Subway sandwich

Other travelling costs

The costs of accommodation and travel to the location for business purposes continue to be deductible.

Conclusion

You’re likely to be thinking to yourself “But…”, “What if…?”, “What about…?” The answer is “no”.

Here are some related resources you might be interested in:

What expenses can I claim for my business?
Inland Revenue’s Interpretation Standard IS 21/06

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