Call for Assistance: 02033 259 341
Spondoo Accounting
Call for Assistance: 02033 259 341
Spondoo Accounting

Onsite Canteen and Lunch Vouchers - Are They Taxable?

May 3, 2021

Canteen and workplace meals

The provision of food and drink to an employee by their employer is a wonderful thing to do. It is known to promote teamworkloyalty, a sense of belonging, and increased productivity. At face value, it looks like a simple act of kindness. However, unless it is done correctly, it can cause tax and national insurance compliance issues for the employer. 

There are a number of scenarios when an employer can legitimately pay for the food costs of their employees. One of them being ‘Subsistence’ and ‘Client Meetings’ when travelling. In this article, we will focus on providing food to staff via an onsite canteen.

Canteen meals

When providing food to your employees via an onsite canteenit is necessary to take note of: 

  • How much  The value and costs of the meals.
  • Where – Is the meal taken on or off the regular business site?
  • Who – is it open to all employees or just some of your staff?
  • Process  How has it been paid for? Is it through employee accounts or vouchers? 

All of the four above considerations will determine if the food you provide to your employees can be exempted from tax and National Insurance Contributions.

Am I Exempt?

If you provide all your employees free or subsidised meals of a reasonable value at a workplace canteen, you’re exempt from tax and NIC charges relating to onsite canteens. Using vouchers that cover the cost of buying these meals counts as a provided meal 

Canteens – Section 317 ITEPA 

A canteen is a place in your business where meals are served to the staff. Eateries, cafes, public houses, or similar enterprises that serve food and drinks to the public are not considered canteens by HMRC. 

To ensure you do not  pay tax on provisions of meals in a canteenemployers must meet these conditions: 

  • Have a within ‘reasonable scale’ meal. Reasonable scale” is a confusingly arbitrary HMRC phrase that is not easy to interpret. It is best to treat that provision with care, because surpassing the HMRC ‘reasonable scale’, loses the exemption. For example, a glass of wine with modest meal is reasonable. Sorry to be the bearer of bad news but the provision of an elaborate menu, fine wines, and cigars are a little overboard!
  • All employees, or all employees at a particular work location, may obtain a free or subsidised meal (or a voucher for one). Simply providing food to a single section of the workforce, such as Directors, does not qualify for an exemption. 
  • Meals are not provided as part of salary sacrifice or flexible remuneration arrangements.

 For the Section 317 ITEPA exemption to apply, you also need to consider the following: 

  1. The exemption applies to meals provided in any canteen. It does not necessarily have to be on the employer’s premises or restricted to the employees of one employer.  
  2. Employees do not have to get the same level of subsidy for their meals. The exemption applies, provided there is a free meal for all. 
  3. A meal provided to an employee by a third party, if the employee is working at the premises of the third party, is subject to an exemption. For example, a contract worker employed by X, who works on-site at employer Y, is exempt from charges if he enjoys a meal in a canteen provided by employer Y for its employees. 
  4. Provided meals do not need to have a schedule or frequency. The chance for all staff, at some time or other, to get a free or subsidised meal is enough to meet the terms of the exemption. 
  5. Meal vouchers get an exemption to the extent that those vouchers are tickets or tokens used to obtain meals on the employer’s business premises or in a canteen open to the employees. It does not apply to meal vouchers used to get meals elsewhere.  

I Am Not Exempt. What Next? 

If you are not exempt, you must report meals and vouchers to HMRC, settling any tax and national insurance due. Free or subsidised meals that are not exempt are: 

  • Provided off-site but not at a canteen, for example at a restaurant or pub. 
  • Lack a reasonable scale, like elaborate meals with fine wines. 
  • Not available to all staff e.g., meals for directors and company secretaries only.
  • Provided under salary sacrifice – an agreement to reduce an employee’s entitlement to cash pay, usually in return for a non-cash benefit. In this case, a meal. The amount an employee forgoes is dependent on what has been agreed upon in the contract between the employer and the employee. 
  • Provided under flexible benefit plans – an agreement that the employee is to be provided with free or subsidised meal, rather than receive benefits within their allowance. An employee will have the choice to retain their stipulated salary and simply vary the levels of benefits within their allowance. Employees can also choose to modify their salary by taking fewer or more benefits. 

We understand this can be a little confusing. Iyou need support on this topic, speak to us about reporting any pecuniary liabilities for Class 1, Class 1A as well as Class 1B national insurance. 

Guidelines  

  • Cash payments or vouchers that can be redeemed either for meals or cash must be included in gross pay when calculating earnings for Class 1 national insurance contributions (NICs) if the employee is permanently employed. 
  • The full cost of all meal vouchers is to be included as earnings to calculate NICs liability. 
  • If your company has commercially marketed arrangements that do not fall within an exemption, the employer should treat amounts credited to canteen accounts as earnings for PAYE and Class 1 NIC. More details on this are on the HMRC website.

Vouchers that can be exchanged for food or cashcash allowances for meals, and top-up payments to an employee’s account for workplace food and drink using a card or PIN system count, as earnings. These costs must be added to employees’ earnings from which the employer will deduct and pay PAYE tax and Class 1 national insurance payroll. 

Be sure to read our guide on claiming food as a business expense, to simplify things further. You can also reach out to us for first-rate clarification and assistance on onsite canteens and food voucher taxation.

more tips

Can You Claim Food as a Business Expense?

The golden rule when claiming business expenses is that the cost must be “wholly and exclusively” for business purposes. So, where do you stand when it comes to food and drink? After all, everyone needs these things to survive. When does it become an allowable expense? Read on to find out when your business can claim food and drink as an expense.
READ MORE

Self-Employed National Insurance Class 2 and Class 4 Rates

If you are sixteen and over, self-employed (sole trader or in a partnership) and making a profit befitting the ‘small profits threshold’, you are liable to pay national insurance.
READ MORE

Key UK Personal Tax Year Dates & Deadlines 2021/2022

Are deadlines creeping up on you? Spondoo is here to ensure you keep on top of things and take control again. These are the important dates you should take note of.
READ MORE

How To Set Up A Limited Company 

A Step-by-Step Guide  This is an easy-to-understand, step-by-step guide, to opening a successful limited company. But before we dive in, let’s check the legality surrounding it. 
READ MORE

Accountants in Haslemere, Surrey

We are qualified accountants providing personal and professional services for start-ups, established companies and individuals in and around the Halsemere area in Surrey. With the rise in technology, we have embraced the digitisation of accounting using efficient digital accounting tools to offer reliable services to our customers. Our goal remains to get our clients the best accounting and taxation services at the most affordable rates.
READ MORE

Onsite Canteen and Lunch Vouchers - Are They Taxable?

The provision of food and drink to an employee by their employer is a lovely thing to do. Eventually, it promotes teamwork, loyalty, a sense of belonging and even improves productivity. Taking it at face value makes it look like a simple act of kindness. However, unless it is done correctly, it can cause tax and national insurance compliance issues for the employer.
READ MORE
1 2 3 39
LEARN MORE
Information provided on the site is merely guidance that may change in line with UK law and regulations. Users must not consider this to be financial advice or their sole resource when making any financial decision. Spondoo is a trading name for Accounting SQL Limited, authorised & license accounting firm under the Institute of Financial Accountants.
© Copyright 2023 - Spondoo - All Rights Reserved
How, can we help?
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram