Until recently the Inland Revenue has been rather liberal in their allowing deductions for food and drink while travelling away on business, but not no longer.
Them days are over, Rover!
The consumption of food and fluids is something we all have to do to stay alive and so new clarification from the Inland Revenue has reinforced the fact that any such costs associated with keeping you alive, cannot be claimed as a business expense.
The following link to this recent Inland Revenue tax update highlights the following limitation when it comes to your business paying and claiming that expense as a tax deduction when that cost is clearly and squarely a personal cost of feeding and nourishing you. And even if that bottle of wine in moderation is good for your health, don’t expect the company or business to pay anymore!
A person is denied a deduction for an amount of expenditure or loss to the extent to which it is of a private or domestic nature. This rule is called the private limitation.
To access this full 36 page IS 21/06 Statement from the Inland Revenue please click this link where you will find this welcome page.
You will note that there are some exceptions with travelling out of town expenses if the employee or shareholder employee employment contract provides for some allowances.
This statement provides a host of different scenarios’ so we would suggest you read them from page 28 on and see if any of these situations apply for your business.
The only exception to this hard and fast rule is if you are hosting a customer(s), supplier(s) or staff. In which case the company can only pick up 50% of the cost and claim it as a tax deduction.
Again we encourage you to read the Inland Revenue’s Entertainment Guide as an entertaining holiday read by clicking this link. This guide will explain what can be fully claimed as entertainment, what is 50% claimable and finally what is 100% claimable, but then gets caught by FBT (Fringe Benefit Tax).
Its all-good stuff to keep accountants gainfully employed and some clients to be left wondering.
Cheers to you all