Let’s talk about those coffee habits.
Subsistence is one of those words that gets thrown around a lot in small business circles, and it’s also one of the most commonly misunderstood expenses we come across. So let’s clear it up once and for all, because getting this wrong can cause real problems with HMRC.
What is subsistence?
Subsistence refers to food and drink expenses incurred as a necessary consequence of travelling for business. The key word there is necessary. HMRC allows you to claim subsistence when you are away from your usual place of work on a business outing and you need to eat or drink as a result of that travel.
So if you travel to meet a client in another city, attend a conference, or make a business trip that takes you away from home for a significant part of the day, the reasonable cost of food and drink during that trip is claimable as a business expense.
The logic is simple, if you weren’t travelling for business, you wouldn’t have incurred that cost. It exists because of the business activity, not in spite of it.
What subsistence is not
This is where things get murky, and where a lot of small business owners fall into trouble.
Subsistence is not your everyday food and drink. HMRC is very clear on this. Everyone has to eat regardless of whether they are working or not, and the cost of feeding yourself on a normal working day is a personal expense, not a business one.
This brings us to one of the most common questions we get asked.
“I work from a coffee shop most days — can I claim my coffee?”
No. And this is really important to understand.
Choosing to work from a café does not make that café a business expense. If you work from a coffee shop five days a week because you enjoy the atmosphere, prefer it to working from home, or simply like a good flat white, HMRC does not consider that subsistence. You have chosen to be there. The cost exists because of a personal preference, not because of a business necessity.
The fact that you are doing work while you are there does not change this. HMRC’s position is that you would need to eat and drink regardless of where you were working, so the cost is personal.
What if I have no fixed place of work?
If you have no fixed place of work, travelling about to client sites etc you cannot claim your daily food and drink, because travelling about is your usual place of work.
Employees don’t get to expense their lunch when they work in a van, why would that be different for a business owner?
What about buying a client a coffee?
This is different and worth covering separately because it causes a lot of confusion.
If you meet a client or a potential client for a coffee and you pay for both of you, that falls under business entertainment rather than subsistence. Buying a coffee for someone else instantly makes the whole lot not tax deductible, which means it does not reduce your tax bill in the same way other expenses do.
However, you should still record it as a business expense in your accounts. It happened for a business purpose and it should be logged as such, even if the tax relief is restricted. Keep the receipt and make a note of who you met and why.
The golden rule for subsistence
Before you claim anything as subsistence, ask yourself this one question: would this cost exist if I wasn’t travelling for business? If the answer is no, claim it. If the answer is yes, or even maybe, leave it out.
HMRC is not unreasonable about subsistence when it is genuinely incurred as a result of business travel. But they are very clear that personal food and drink costs, however much you are working while you consume them, do not qualify.
Not sure what you can and can’t claim?
Getting your expenses right saves you money and keeps you on the right side of HMRC. At 2 Sisters Accounting we help small business owners understand exactly what they can claim — without the jargon and without the guesswork.
