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Hello all,
I'm sure this has been brought up time and time again, but I cannot find it on here!
My client - sole trader operating a retail outlet - has been trading for just over 5 years. I took over his bookkeeping back in May/June, it had previously been done, very shoddily, by the Accountant. Financial year runs May to April.
I was tasked to complete the Feb - Apr bookkeeping in prep for the Q4 VAT return, then prepare the year end accts to TB. What a mess. Lots of very daft things going on in Sage, some of which i didn't agree with, but after lengthy conversations with the Acct, i just followed what had been done before and brought the bookkeeping up to date.
We're still working on year end, but in the meantime I have rebuilt Sage and started again from scratch, entering the trading figures etc from the beginning of the new financial year in an attempt to actually do things the correct way this time. (opening balances to be entered once YE is complete). Q1 VAT return is overdue (with permission from HMRC) and i am stuck on what to do with some till payments.
The client pays for his lunch (Tescos meal deals, sandwich from the deli, etc) using money from the till. Previously, the Acct had put it through as Refreshments, but I'm not so sure. I think it should be Drawings. The client is adamant that the Acct has given the nod to expense it, stating that employers are allowed to feed their employees...
Can someone please give a definitive answer? I don't want to ask the Acct as i'm not sure i trust her.
TIA
Helen.
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- Member PM.Dip
- Practice Licence
- 195 posts
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In my opinion this should definitely be drawings. Employers do not usually feed their employees - they give them an hour for lunch to go and sort their own food!
I would normally class refreshments as being for customers so for example if someone attends a trade show, pays for a stand and gives passers by sausage rolls, that would be an allowable expense of refreshments.
Have a look here for more guidance http://www.hmrc.gov.uk/incometax/relief-self-emp.htm but the rule is basically is this expense wholly for business purposes e.g. would this expense not occur if the client were not carrying on the business? Obviously the client needs to eat regardless of employment or business hence the expense is not alowable and should be coded to drawings.
Hope this helps
CLare
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- Fellow PM.Dip
- Practice Licence
- 111 posts
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Hi Helen
It's not claimable as an expense. I recently attended an HMRC course and the question arose (can I claim my lunch expenses) and the answer was, if you buy lunch for yourself every day then no, if you are away from your usual place of work and have lunch then yes (within reason) you can claim as an expense.
I would recommend speaking with HMRC if you want confirmation though, it is worth it for peace of mind and at least then you can go back to him with confidence, the last thing you or he want to deal with is an investigation!
HTH
Victoria
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- Member PM.Dip
- Practice Licence
- 481 posts
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hellonwheelssaid:
“The client is adamant that the Acct has given the nod to expense it, stating that employers are allowed to feed their employees...”
This piece below has been copied from Helpsheet 207 from HMRC (Non taxable payments or benefits for employees). My writing is in red.
Free or subsidised meals
Free or subsidised meals provided on your employer’s business premises,
or in any canteen where meals are provided for staff generally, or a ticket
or token used to obtain such meals, if:
• the meals are provided on a reasonable scale, and either
• all employees can get free or subsidised meals on a reasonable scale,
whether on your employer’s premises or elsewhere, or
• your employer provides free or subsidised meal vouchers for staff who
do not get meals.
This exemption does not apply, in the case of an hotel, catering or similar
business, to free or subsidised meals provided for you in a restaurant or
dining room at a time when meals are being served to the public, unless part
of it is designated as being for the use of staff only and you take your meals
in that part.
Meal vouchers
Meal vouchers issued to you provided that:
• the vouchers are non-transferable, and
• they are used for meals only, and
• the value of vouchers issued to you does not exceed 15p for each
working day, and
• where any restriction is placed on their issue, they must be available
to lower-paid staff.
You pay tax on the value of any voucher or part of a voucher not meeting
these conditions.
So the accountant may be correct in stating the employers are allowed to feed their employees - but subject to certain conditions.
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Peasie - yes the client pretty much quoted this.
However, it is a small shop, he pretty much single-handedly runs it (barring a few occasions where he has a day off and gets a friend in to mind the shop), and it is very clearly "lunch for 1" e.g. a sandwich, snack, and a drink everyday. Occasionally, it will be a loaf of bread and a variety of sandwich fillings (e.g. ham, cheese, tomatoes).
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- Member PM.Dip
- Practice Licence
- 481 posts
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hellonwheelssaid:
“Peasie - yes the client pretty much quoted this. ”
No doubt you've already pointed out to him he is an employer not an employee.
I once did the books for a restaurant and carry out place. Many years ago before I did all the ICB exams. It was done manually. One of the partners in the place had to argue with HMRC that he had a medical condition that prevented him from eating any of the food he prepared. Fried food etc. They wouldn't accept that he didn't eat the occasional food whilst working all day. It was ok for his employees to eat the food (subject to the rules) but not for him.
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Hi Helen,
Thanks for openly sharing your personal opinion on the work carried out prior to you taking over!
There is no harm in expressing personal opinion!
This is not an allowable expense. The helpdesk 207 apply for food provided by an Employer to Employees.
Petty cash is for small incidental transactions incurring within the office, not for frequent food consummed by the sole proprietor of the business!
This need to be posted to Drawing account and Client need to be educated. This will not please the client but there is a professional and tactful way of passing on the message!
All the best and stick to you gun!
Kind Regards,
Nathaliexxx
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Nathalie - believe me, it's not my opinion, it's a fact. If you'd seen the state of their Sage, you'd agree!! I've worked with this Acct for a different client. The client had been trading for 11 years and the Acct had never once told them that they were constantly making the same mistakes (so Acct would charge them extra for having to sort it out at year end). I've now trained them and stripped their Sage so it's nice and clean and will stay that way!
Peasie - so did HMRC eventually agree to the partner's lunch being expensed?
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hellonwheelssaid:
“Nathalie - believe me, it's not my opinion, it's a fact. If you'd seen the state of their Sage, you'd agree!! I've worked with this Acct for a different client. The client had been trading for 11 years and the Acct had never once told them that they were constantly making the same mistakes (so Acct would charge them extra for having to sort it out at year end). I've now trained them and stripped their Sage so it's nice and clean and will stay that way!
Peasie - so did HMRC eventually agree to the partner's lunch being expensed?”
Helen I totally believe you. In fact I admire your approach of relating/recounting facts. I have also come accross incredible facts too, believe me! This type of mess need to be addressed and cleaned. Glad you have done what you had to. Constant mistake makes you wonder if they are actually honest ones or not! Well done Helen, I like your approach.
Partner's lunch being expensed...Lol someone must have been having a 
Kind Regards,
Nathaliexxx
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- Member PM.Dip
- Practice Licence
- 481 posts
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hellonwheelssaid:
Peasie - so did HMRC eventually agree to the partner's lunch being expensed?
The point I was trying to make was the Partner did NOT consume any food on the premises. HMRC were saying that because he was there all day in their opinion he must have been consuming some food. He had to argue with them that he couldn't eat the (fried) food. This argument with HMRC was before my time (and when it was the Inland Revenue).
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