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  • Writer's pictureJames Kingston


Updated: Jan 20, 2021

Good Morning, Thank you to everyone for your engagement during the January rush, and indeed through the whole self-assessment filing window. It was good for my middle-aged ticker to get the last self-assessment tax return across the line with a whole 2 days to spare. Primary focus for now has turned to the December year-ends of many of my Commercial clients, and preparing this Practice for the year ahead. Given the rise of coffee shop culture, many of us choose to meet with our clients in the various outlets available to us. They are a break from of our normal working environments, neutral territory for meetings, and in most cases are comfortable and homely. Understandably then, I see a considerable volume of transactions going through your accounting records, in respect of coffee shop expenditure. I wanted this note to serve as a reminder of the rules, and my policy for allowing this expense. COFFEE WITH CLIENTS 12th FEBRUARY 2020 Generally speaking, charging coffee with clients, against your taxable income/profit, is not allowable as it is classified as ‘client entertainment’. Client entertainment, as I hope we’re all aware, is a big no-no when it comes to deductions. It sounds harsh, particularly as some people do not have access to meeting facilities, and the purchase of drinks is done in order to be able to stay. It is argued by detractors that this coffee shop expense equates to meeting room hire. For now anyway, the rules remain. However, under the ‘subsistence’ and ‘staff entertainment’ rules, there may be certain circumstances where your (not your client’s) expenses are allowable. HMRC deem eating and drinking to have a personal use – i.e. functioning. Subsistence rules therefore only take effect when you are away from your normal base of operations for a period of time, or doing something outside of your normal working routine. How far away from your base, is unhelpfully not defined. However, nipping up to Café Nero on the high street would not likely be viewed as a business trip. The rules are admittedly complex and nuanced, but generally accepted amounts and times are as follows: Breakfast rate – Up to £5 for a pre 6am start. This needs to be an irregular event One meal rate – Up to £5 can be paid when away from home or normal place of work for 5 hours or more Two meal rate – Up to £10 can be paid when away from home or normal place of work for 10 hours or more Late evening meal rate – Up to £15 can be paid for a finish after 8pm having worked a normal working day. This also needs to be an irregular event. So you see its all to do with the amount of time away, and what is deemed a reasonable expense. A £7.50 slab of artisan carrot cake would not qualify for full relief under the one meal rate. Grabbing a coffee on the way to your normal office, would not qualify because it’s not a break from the norm, and you are not away for long enough. Technically speaking though, a coffee can make up part of your subsistence allowance, provided you are away from your base/routine for long enough. As you may be aware, an ‘annual party exemption’ is available for businesses under the ‘staff entertainment’ rules. This is an allowance of £150 per employee per year, exempt from income tax and NI, provided it is spent on one or more annual event(s) and is open to all. Expenditure in excess of this would deem the entire cost of the event to be exempt. So, coffees consumed at a qualifying event would be allowable. Admittedly though, it is quite the leap to describe a visit to Costa as an ‘event’. Think about the substance of the transaction. If it were ever scrutinised by our friends at the tax office, how would it appear? My normal policy, is from a point of trust and pragmatism. In most cases, I’m able to identify clear breaches and take appropriate action. However, at the same time I place trust in you to either be aware of the rules (either via my comms or a 3rd party source) or to get in touch with me to find out what the rules are. If a transaction has been charged to your business, which isn’t compliant, this is still fine provided it is labelled as a ‘personal expense’ so that accounting adjustments can be made. I would expect my next note to be around this time next month, to coincide with the all important March 11 budget statement.


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