Dear Contractor Doctor,
I’m spending Monday to Friday working away at my client’s site, and stay Sunday to Friday in a rented apartment near the site.
There are few shops near the site and I don’t use the canteen to avoid IR35 issues. Instead I shop for a week’s worth of packed lunches at a local supermarket.
Can I claim for weekly shopping to make packed lunches or do I have to eat out each day?
Contractor Doctor says:
“When contractors are travelling to a temporary workplace, any subsistence claims arising are normally associated with that travel,” explains James Abbott, owner and head of tax at contractor accountant Abbott Moore LLP.
“So, under certain circumstances, it may be possible for a contractor to claim from their limited company for the cost of a weekly shop to make packed lunches .”
If travel qualifies as a business expense, so may subsistence
Contractors can charge allowable travel and subsistence expenses to their limited companies, and such legitimate business costs qualify for corporation tax relief regardless of whether the costs can be charged back to the client.
“If a contractor is travelling to Manchester from their home in Birmingham to meet a client, then the travel costs would normally be allowable,” continues Abbott. “If the contractor has a sandwich on the train, then HMRC would consider this subsistence cost to be an allowable expense.”
However, costs incurred prior to the journey, such as buying the ingredients to make a packed lunch to take on the journey would not be allowable.
“HMRC would argue that a packed lunch was not actually bought on the journey so would most likely disallow the expense,” adds Abbott. “This would be compounded if the contractor purchased the packed lunch ingredients as part of a normal household shop.”
Working away from home long-term
But for a contractor working away from home Monday to Friday, the story may be different, Abbott explains: “In Neil’s case, he is travelling to his temporary accommodation because his client’s site is not a reasonable commutable distance from his home.
“He buys the ingredients for his packed lunch at the location of his temporary workplace and separately from his normal household shopping. The subsistence costs are clearly associated with an allowable travel and accommodation expense.
“HMRC allows contractors to purchase travel in advance, such as weekly season tickets, and the subsistence cost of packed lunches bought at the start of the week is no different. As long as the costs are incurred exclusively when the contractor is away working at a temporary workplace, and kept separate from personal shopping for home, they are allowable.”
Eating out versus buying in
According to Abbott, the packed lunch argument could be extended to all subsistence when a contractor is away from home for long periods.
“If hotel or bed and breakfast costs are high, a contractor can choose to rent a property close to their temporary workplace,” says Abbott. “Rather than eat out each evening, a contractor could buy in food for consumption in their rental property and the subsistence costs of shopping for, say a week’s worth of dinners would be within HMRC’s framework.”
HMRC allows contractors to purchase travel in advance, such as weekly season tickets, and the subsistence cost of packed lunches bought at the start of the week is no different
James Abbott, Abbott Moore LLP
However, Abbott cautions contractors against making claims for expenses if the tax savings are likely to be very small but could attract the attention of HMRC during an inspection: “In the grand scheme of all the strategies contractors can apply to save tax, the savings on packed lunches are small versus the risk of attracting unwelcome attention.”
Good luck with your contracting!