You are thinking about providing free meals to your employees to help them with the rising cost of living. You can buy in bulk and can access discounts not normally open to individual employees. But how do HMRC view this? Naomi Swan CA, looks at this below.
While the headline rate of inflation is slowly reducing, the figure for food and other groceries remains persistently higher. One way to mitigate this is to buy in bulk. However, that comes with problems such as shelf-life storage and, of course, financial means. As an employer you can help by providing meals in the workplace for which you’re entitled to a tax deduction from your profits, plus the perk is often tax and NI free to your workers.
Conditions for exemption
For employer provided meals to be tax and NI-free perks, they must be prepared in a canteen where they are provided for employees generally or to those at a particular location. Alternatively, if they are served on your business premises and conditions A to C below must be met.
Condition A. The meals are provided on a reasonable scale.
Condition B. That all employees or all of them at a particular location, e.g. a particular branch office, may obtain either a free or subsidised meal and/or a free or subsidised meal voucher or token.
Condition C. If the meals are provided in a restaurant or dining room at a time when meals are being served to the public, part of this is designated for the use of employees only and the meals are taken in that part.
It is not necessary for all employees to receive the free or subsidised meals, just that they are offered them.
Where the food is provided away from your business premises, the exemption only applies if it’s provided in a designated area of a restaurant that is not open to the public for at least the period it’s being used as your canteen.
Meals for selected employees
Meals that don’t meet the conditions for exemption, for example because they are not available to all employees, are a taxable benefit where they are provided to employees and directors. An exception to this applies for meals taken in the course of work-related training which requires employees to travel away from their normal workplace to attend. The location must be sufficiently distant from the workplace that the employee would be entitled to claim a tax deduction for the cost of subsistence as if they had been travelling to, say, a customer to carry out work at their premises.
If the location of the training means that the meal isn’t exempt, it may instead be covered by the trivial benefits exemption (which applies to benefits costing up to £50 per head). For the exemption to apply the meal should not be provided as a reward for attending the training but as a genuine perk. You might also be able to argue they are covered by the main exemption because they are meals provided to all employees “at a particular location”.
While the exemption refers to “meals”, HMRC accepts that free tea, coffee and other drinks count as trivial benefits and so are exempt. That means you can provide limitless beverages, perhaps accompanied by a biscuit or other sweet treat, without worrying about tax or NI.
You’ll get a tax deduction from your profits for the cost of the food and drink. In most situations the meals don’t count as a taxable benefit if conditions are met, i.e. the meals are offered to all employees (or all employees at a location) either in a canteen or on your business premises. Tea, coffee and light refreshments are also exempt.
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