Contractors' Questions: Are refreshments claimable via my 'Ltd'?

Contractor’s Question: I have my own limited company and mainly work from my home office. Would it be allowable to HMRC to put office refreshments through the company accounts?

Expert’s Answer: A lot will depend on what you mean by “refreshments.”

If you are talking about tea, coffee and biscuits for consumption at client / business meetings that you’re hosting at your home offices, then yes, in theory these would be a legitimate cost that can be paid by your company.

The challenge and potential stumbling block comes in demonstrating that the refreshments were used “wholly and exclusively” for business purposes. Because you are working from home, you need to distinguish work-based consumption from personal, after-hours consumption.

This might sound trivial but if you think about it from HMRC’s perspective, they will want to be satisfied that you have incurred a legitimate business cost.

The best way to do this would be to buy your refreshments separately from your usual food shopping, and through your business as opposed to your personal bank account.

It would also be extremely helpful to have your home address listed as your place of work in your contract with your client(s).

Having a contract stipulate that your home address is also your business address in this way would help to reinforce the fact that you are working from home and incurring legitimate expenses.

Note, doing this would also be helpful should you look to claim other expenses related to working from home, such as IT equipment, office furniture and cost towards your utility bills.

So to conclude, if you are able to provide this clarity and distinction regarding business versus personal consumption, then you could pay through your company and claim these for tax relief.

If, however, by refreshments you mean general day-to-day subsistence (food and drink when working at a client’s site) costs, then this would not be a legitimate business cost while working from home.

HMRC’s broad view is that everyone needs food to live, and that you would be eating and drinking (and therefore incurring the cost) regardless of whether you were working from home or just living there.

The expert was Jon Cooper, accounts service manager at contractor accountancy firm ADVANCE.

Thursday 24th Aug 2017