Contractors' Questions: Am I due tax relief on my daily food bill?

Contractor’s Question: I work from home but attend various sites during the day to inspect their IT facilities and other technical machinery. I don’t get home till late afternoon at the earliest and am out the house for 8-10 hours per day. So can I claim food allowance of my tax?

Expert’s Answer: As a contractor you are able to claim the cost of subsistence for tax relief, but this is dependent on how long you have been working at your client’s site, and your IR35 status.

If you have been working at your client’s site for 24 months or more, or the contract lasts for 24 months or more, then the working site will be deemed to be your regular place of work and you will not be able to claim the cost of subsistence for tax relief. On the other hand, if you only spend 40% of your time at this site, then this so-called 24-month rule doesn’t apply.

Where IR35 is concerned, you will need to determine whether the contract/working conditions are inside, or outside of the IR35 legislation. Assuming that you are outside IR35 then the recommended claimable amounts for subsistence are as follows:

  • If you are working at your client’s site for at least 5 hours a day, including travel, then we recommend the claimable amount is £5 per day
  • If you are working at your client’s site for at least 10 hours a day, including travel, then we recommend the claimable amount is £10 per day

We advise that you retain receipts for all expenses so in the event of a HMRC investigation you have evidence that the expenses that you have incurred were “wholly and exclusively for the purposes of the trade.” This is where you need to be organised and ensure you are not frantically searching for old receipts if the tax authority does get in touch.

The expert was Michael Hough, director at Quantic UK, a specialist in freelancer and contractor accounting.

Thursday 5th February 2015