Contractors' Questions: Will the umbrella digest my dinner expenses?

Contractor’s Question: I'm new to IT contracting - got my first job through a recruitment agency and signed up with an umbrella company. But it’s contractor expenses that I’m stuck on.

To explain, the umbrella told me that if I'm away from home, for my job, for 10 hours or more per day, I can claim dinner expenses. My hours of work are from 09:00 to 17:30, but the motorway journey to work is an hour each way, so in total, I'm out of the house for 10.5 hours.

So I can claim for dinner, surely? I am worried that claiming it's just going to leave a bad taste in my employer's mouth, no pun intended! So my question is: would I be standing up for my allowance rights as a contractor, or taking a liberty that could upset my employer, if I claimed for the dinner?

Also, what are the taxman’s rules regarding receipts for meal expenses? On my first day, I bought lunch in the morning, on my way to work, so does that mean I can't claim for it, because I didn't buy it at around lunch time?

Expert’s Answer: Firstly, some background is necessary.

Expenses other than travel - including food - must be ‘wholly, exclusively and necessarily in the performance of the duties of the employment.’ The test for travel expenses is less severe but the expense must be necessarily incurred as part of the travel. The purchase of meals would never pass the first test.

Yet it is accepted that necessary subsistence is a part of a travel expense where the travel is the reason for the expense. As we have to eat in order to live, the only time a meal allowance can qualify is if there is an extra expense directly related to travel. This cuts out taking a packed lunch from home as the expense is not one of travel, as it simply satisfies the need for general sustenance.   

Do you eat while driving?

On the assumption that the expense qualifies, in law HMRC set a rule that in order to claim for one meal you need to exceed 5 hours - it would not make sense for you to be allowed to work for one hour on one day and claim a meal allowance because the hour happened to be 12.00 to 12.30 and 13.30 to 14.00 with a hour for lunch.

HMRC go further and set a limit of 10 hours for two meals. But you must actually spend money on a meal or meals. If your day exceeds 5 hours and you purchase a meal and you pass all the other tests, you will qualify for the meal allowance. In your question, you tell me that it is the journey time that takes the total over the 10 hours but unless you are eating while you are driving, you do not actually purchase a meal during the qualifying 10-hour period. Furthermore, please note that you do not get an ‘extra’ meal allowance simply because you have exceeded 10 hours.

Common sense needed

All of this has to be approached with a degree of common sense. If you were to finish work at 5 pm, buy a (second) meal round the corner and then travel home the total time would be, say, 11.5 hours and then I don't see a problem with claiming. On the other hand, if you travel home and go for a meal at the local pub 200 yards from home, I do see a problem. Similarly, if your normal journey makes the total time 9.5 hours and you have a second meal that takes the total time to 10.5 hours, I do see a problem.

Be ready to evidence your eating expenditure

You should purchase a meal and must be able to prove it with documentation. The umbrella should either reimburse actual expenditure or pay the benchmark rate. You refer to dinner - there is an evening meal rate of £15 with the benchmark rates, but that is to be granted in exceptional cases only.

You also ask about the time of purchase. The allowance is for a meal consumed during the working day but the time of purchase can be a factor - if you are purchasing a sandwich on the day and on the way, I don't see there being an issue. But if you purchase a sandwich the night before then you are introducing an element of doubt. Some umbrellas therefore insist that the meal is purchased on the day, so as to remove this element of doubt.

All meals must be supported by documentary evidence. The umbrella will insist on seeing all receipts or, if the benchmark rate is in operation, you must retain all receipts and produce them when requested, as HMRC will agree to an employer performing a sample audit. 

The expert was Bob, the retired tax inspector. 

Friday 25th October 2013