All You Need to Know About VAT on Subsistence
Subsistence is one of the areas that cause the most confusion when looking at VAT and expenses so we hope this article will help you understand the rules when claiming back your VAT.
The first area of misunderstanding is often the difference between staff entertainment and subsistence. Carry on reading to find out more.
What is subsistence?
Subsistence refers to food and drink paid for by a company when an employee is away from their usual base for an extended period. This is different from staff entertainment, which involves providing food at the employee’s usual place of work, such as during a meeting or office event.
Subsistence vs. Staff Entertainment
- Subsistence: When an employee is working away from their main office and requires meals (e.g., staying overnight in a hotel and having lunch and dinner paid by the company).
- Staff Entertainment: When food is provided at the employee's regular workplace, such as during a function or regular meals.
Can You Claim VAT on Subsistence?
So, can you claim VAT on food expenses?
Yes, you can claim VAT on subsistence as long as the food and drink expenses meet the necessary criteria. Subsistence VAT is reclaimable when an employee is away from their usual base and the expenses are directly related to their work.
How Much Can You Reclaim?
For VAT purposes, the subsistence payment must be reasonable. HMRC provides some guidance, though there aren’t specific VAT amounts:
- 5 hours away: Up to £5 for food and drink.
- 10 hours away: Up to £10.
- 15 hours or more away: Up to £25.
HMRC Food Allowance and Subsistence
The figures above are the general benchmark rates for subsistence but employers can agree on bespoke amounts with HMRC. There are also nationally agreed scales for certain occupations such as the Road Haulage Association that can be used.
HMRC food allowance is designed to provide guidelines for reasonable subsistence payments. It’s crucial that the amount paid aligns with HMRC’s subsistence guidelines to ensure proper VAT reclaim.
Final Thoughts
In summary, claiming VAT on subsistence is possible under the right conditions. Ensure that:
- The employee is away from their usual place of work.
- The expenses are for subsistence, not entertainment.
- The amounts are within reasonable limits set by HMRC.
|
Scenario |
Can Claim VAT |
|
Subsistence (Employee working away) |
✔ |
|
Hotel Accommodation (Business) |
✔ |
|
Peer-to-Peer Accommodation (e.g. Airbnb) |
✔ (on booking fees if VAT-registered) |
|
Food at Usual Workplace |
✘ |
|
Travel Costs (e.g. Taxis, Parking) |
✔ (on VAT-registered taxis and parking) |
|
Meals and Drinks at Events |
✔ |
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You can also view our other accounting resources, such as our end of year accounts checklist and guide to the financial year.
VAT on expenses guides
Handy guides for you to download and keep in your back pocket.
The ultimate guide to VAT on expenses
Master the basics of VAT on expenses and be confident in what you can claim for with this guide.
The 7 step guide to getting compliant
Ensuring you get, and stay, VAT compliant with Expenses can seem like a mammoth task. With our step by step guide, you can be confident you're not missing a thing.
The guide for what you could be missing
Whether you're a VAT veteran or a VAT virgin, VAT on expenses can still be a subject that gives accountants sleepless nights. This guide walks you through all of those commonly missed items in one download.
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