Can I claim meal expenses for my e-commerce business?

Correctly claiming your expenses can make a substantial difference to your bottom line in the early days of e-commerce business trading, but do you know what you can and can’t include? Meal expenses aren’t as black and white as many may think, so let us steer you in the right direction.

Whether you claimed back that lasagne at a wholesaler meeting last week is unlikely to be what makes or breaks your e-commerce business, but you do want to ensure you claim back everything you’re entitled to. This will help you maximise your business’ profits and minimise your tax bill, especially when margins are low or you’re just starting out.

HMRC’s Rule

With matters of tax, you are always best to take your information straight from the source. HMRC’s guidance on meal expenses states that they must be “wholly and exclusively” for the purposes of trade. This automatically complicates matters as food and drink are rarely solely for trade, they are more often than not just part of your daily life.

To separate what is for trade and what is for survival, your meal must be outside of your normal routine. For example, if you buy a sandwich from the deli every day you work at the office, this is not an allowable expense. If you took a client for steak while you hammered out a deal, then it is likely allowable.

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So, you can claim back money spent on food during business trips, meetings, and events, but you can not claim everything you eat.

Sole Trader or Limited Company

The rules on allowable meal expenses are also slightly different depending on the status of your business. While all self-employed people can claim back some business expenses, but within a Limited Company whether you are a company director or not can make a difference.

Meal expenses for directors

If you incurred the meal expenses entertaining a client, stockist or other important person to your business then you can claim your expenses as they were incurred performing your duties. These costs are disallowed in terms of profit so will make no difference to your bottom line. These cannot be claimed if you are a sole trader.

Sole Traders and meal expenses

Sole traders can claim for meals on any overnight trips for business purposes. If the purpose is a mix of business and leisure then you will need to account for that accordingly. Any meal expenses that you claim back will be a business tax deduction. To claim, you will have to prove that it was solely a business expense and not for personal gain.

Employees expense claims

If you employ workers, then you will be required to cover accommodation and meal expenses if they travel for work purposes. A set cap dependent on the area of travel is standard practice, and receipts must be obtained for accounting purposes. Keeping receipts is important to prove and keep track of business expenses when filing and submitting your tax return.

You can also claim back accommodation costs of employee business trips as well as breakfasts, dinners, and evening meals while working away if they meet the requirements.

Accounting for meal expenses for e-commerce
Ethan Hu

Meal expenses with a movable workplace

With an increasing number of us choosing to work remotely, it is important to note HMRC’s rules on whether a workplace is temporary or permanent. If you work somewhere continuously for more than 24 months (such as a rented office, a co-working space etc.) than that workplace is no longer temporary, and you won’t be able to claim any meal expenses incurred through being there. Continuous work is defined as 40% or more of your working hours.

Additionally, this is the case if you have a set pattern. If, for example, you go for a meeting with your stockist every Tuesday and work out of their office, then HMRC may decide this is no longer outside of the norm, so you won’t be able to claim your meal expenses.

What to remember

The two key things to remember with meal expenses, and all other expenses, are to document your spending and to consider whether it was wholly, partially or not at all necessary for business purposes. E-commerce business owners are likely to travel to meet stockists, logistics solutions and larger clients but are unlikely to have a continuous need for local lunch meetings with unrelated business
acquaintances. If you can’t justify it to yourself as a business expense, then it shouldn’t be appearing in the accounts.

What are other allowable expenses for e-commerce businesses?

In addition to meals for employees and directors, there are several other allowable expenses that e-commerce businesses can deduct from their profit sheet to save money on their tax bill.

To qualify as an allowable expense, expenses must be business related. Common examples in office costs, travel costs, and clothing/uniform expenses. Expenses can also be ‘dual purpose’ meaning they can be used for business and personal use such as mobile phones.

These allowable expenses are essential business costs, but it should be noted allowable expenses are different for limited companies and the self-employed.

If you are self-employed, costs you can claim as allowable expenses also include staff costs (such as subcontractor costs and salaries), insurance and bank charges, advertising and marketing costs, training courses, and example stock or raw materials.

How do I know if something is an allowable expense?

If you are unsure whether a cost can be claimed as a business expense, contact HMRC or get in touch with a specialist e-commerce accountant.

When handled correctly, allowable business expenses can significantly reduce your annual tax bill so it is worth investigating and ensuring you get it right.

Need help with your expenses?

At Unicorn Accounting we want you to get the most out of your business, and a piece of that puzzle is claiming back the right expenses. If you want to discuss your expenses, or how you can grow your e-commerce business, then get in touch today.

Why choose Unicorn Accounting?

Ensure you keep on top of your finances and tax obligations by outsourcing to an accountant. This means that you don’t need to worry about your end of year accounts, payroll, or bookkeeping requirements.

At Unicorn Accounting we are e-commerce accountants who help make your online business a growing success. We offer e-commerce accounting advice, financial management, bookkeeping, cash flow statement, and tax filing services to support and scale your business.

Our team of accountants and Xero-certified advisors have experience working with both small start-ups and family-run online stores to large-scale, international retail and e-commerce brands.

If you’ve got an online store, we have the best solution for you. Providing you with a financial arm to your business through our sector experience, and skills with innovative technologies. To see how we can help you maximise the scalability of your e-commerce brand all year roundget in touch with Unicorn Accounting today. Or click here to get a free quote.


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