Did you know that you may be able to claim self employed daily food allowance for the cost of some meals and also overnight stays? This handy guide contains everything you need to know to get started with claiming your allowances.
(6 Minute Read)
What counts as subsistence?
Before discussing the ins-and-outs of self-employed subsistence allowance, it will be helpful to make sure that we’re working with a clear definition of what ‘subsistence’ is.
A general definition of subsistence from the Cambridge dictionary states that subsistence refers to ‘having what you need to stay alive, but no more.’
In UK tax law, the term is much more specific.
For the purposes of self-employed subsistence allowance, it means food, drink and costs associated with accommodation from overnight stays.
You can only claim your allowance on food that you eat when conducting your work. If you’re entertaining your staff or having a business dinner, there is another set of rules which you can find here.
Eligibility for Self-Employed Subsistence Allowance
Anyone who is self-employed is eligible to put in a claim for subsistence allowance
- Independent contractors
- Sole traders
How does Self-Employed Subsistence Allowance Work?
There’s no upper limit to what you can claim.
However, your claims must be reasonable.
This means that you must claim only for expenses that you have actually incurred. You must also be able to provide evidence of these expenses.
Although there is no specific rule against claiming for an expensive lobster dinner, such outlandish claims are extremely likely to be rejected.
Expenses that you claim under your self-employed subsistence allowance are tax deductible. This means that you pay for your food or accommodation and then have the amount you paid deducted from your tax bill.
For example, if your revenue is £55,000 and your total allowable expenses are £5000, you’ll only have to pay your taxes on £50,000. You won’t be reimbursed directly.
Due to the way the system works, you must always keep all of your receipts for anything you’re claiming for. It is vital that you have evidence of your spending and can prove that you incurred these expenses for work.
When to Claim Self-Employed Subsistence Allowance
Knowing when you can claim your cake with self-employed subsistence allowance has been very complicated for some time now.
This is partially because of a legal case from 1975, the Caillebottle v Quinn case.
To summarise the case – A self-employed carpenter worked on several building sites around his home. When he found himself unable to go home for his midday meal, he decided to buy some food and claim it as a business expense. This seemingly small decision sparked a complicated legal debate.
At first, his tax claim was disallowed by a tax inspector.
Afterwards, the General Commissioners ruled in his favour, that his meal was a business expense.
However, their decision was over-turned by the High Court who decided that the meal could not be considered a business expense.
So, how did one man’s lunch cause so many problems?
The Rule of Dual Purpose and Self-Employed Subsistence Allowance
The High Court ruled that the carpenter’s midday meal could not be claimed as a business expense because it served dual purposes.
They judged that he was eating to live, not eating to work.
This ruling was a watershed moment for those wanting to claim self-employed subsistence allowance. After this ruling, an informal rule was adopted by tax experts and self-employed workers across the country.
This is the rule of dual purpose.
This rule means that you can only claim self-employed subsistence allowance for food or drink that is wholly needed for your business. If a meal serves an additional purpose, such as being a general daily meal that you would eat on your days off, it cannot be claimed.
Allowable Self-Employed Subsistence Allowance Claims
Now that we’ve established one of the key factors that could limit your potential claims, lets discuss what expenses you can claim your allowance on.
You can only claim on food, drink and hotels when it isn’t your ‘normal’ place of work.
When defining your normal place of work, consider both frequency and regularity. A normal place of work includes the place where you work most frequently and a place where you work regularly.
For example, an office you work in for five days per week is a normal place of work. Similarly, if you only work in a specific location for one day per month, but do so regularly, this is also a normal place of work.
To be able to claim for self-employed subsistence allowance, you must be working anywhere outside of your regularly planned locations or patterns. This is called a temporary workplace.
A workplace is considered temporary if you are only there for a limited period of under 24 months.
An example may help to clarify the difference between normal and temporary workplaces:
Let’s say you’re going on a business trip to a conference that lasts for one weekend. This is a temporary workplace and subsistence costs you incur here are caused wholly by your work. As a result, you would be able to claim self-employed subsistence allowance.
However, if you are a construction worker contracted to work at a specific site for 26 months, you cannot claim self-employed subsistence allowance because you will be working at a normal workplace.
Another complicating factor is route similarity.
Even if you are working outside of your normal workplace, you might not be able to make a claim if the route to get to this place is too similar to your normal route.
An itinerant worker is someone whose work inherently involves travelling from place to place with no fixed workplace.
The rules surrounding subsistence allowance are more complex for itinerant workers.
Normally, you would be able to claim for all travel expenses.
However, in circumstances where you are an itinerant worker who is allocated to a specific area, you may not be able to claim as much in self-employed subsistence allowance.
This may be the case if you are a delivery driver who works exclusively in one town or city.
Where to get Help with Self-Employed Subsistence Allowance
The nature of self-employment means that there are lots of different types of work you can be doing. Each set of circumstances is unique.
All this variety means that it can be hard to work out what your allowances are for your specific situation.
As a result, we recommend getting tailored advice from a specialist, which is exactly what you’ll find at Tax Expert.
Give us a call on 01772 788200 to learn more about how we can help you get your accounts sorted. Or, if you’d like, send us an e-mail by leaving your contact details below and we’ll get back to you right away.
For more information on reclaims related to self-assessment, please visit My Tax Rebate.
Kind regards Ilyas