A client owns a pub/restaurant and provides his staff with a meal halfway through their shift, is this a taxable benefit?
If a free or subsidised meal is provided to employees by their employer there may be tax relief by exemption or by deduction.
- If the meal is part of an employee or director travelling on qualifying business travel
- If the employee’s or director’s meal is part of business entertaining and there is a matching deduction under S336 ITEPA 2003
- Under the exemption in S317 ITEPA 2003
In the client’s case, by providing a meal to his staff during their working hours, there is no tax charge if the meal is provided in either a canteen or at the workplace and the following four conditions are met as detailed in S317 ITEPA 2003.
The conditions are
- That the meal provided is on a reasonable scale. Further information on what is meant by ‘reasonable scale’ is detailed in EIM21671.
- That all the employer’s employees or all employees at one location can obtain either a free or subsidised meal or a free or subsidised meal voucher or token
- That if the meal is provided in a restaurant, dining room of a hotel or other similar business, that a part of that area is designated for staff use only and the meals ae taken in that part
- That the meal is not part of a salary sacrifice or flexible remuneration arrangement. Further information can be found in EIM21676.
If all the above conditions are met, then tax relief can be obtained on a free or subsidised meal in the workplace.
If the conditions are not met then the benefit of the free or subsidised meal must be reported on a P11D or the benefit processed through the payroll and the employer will have a Class 1A National Insurance liability to pay on the benefit.
There is no requirement that all employees must have frequent meals at the workplace, just that they have the opportunity to have a free or subsidised meal if the employer offers such a benefit.
If meals are provided in a canteen, the exemption can apply to any canteen. The canteen does not have to be on the employer’s premises or restricted to employees from one employer only. For example, one canteen could provide meals to all employees working on one industrial estate if all the employees from a particular employer can access the meals at the canteen.
The exemption will also apply to a meal provided to an employee by a third party. For example, if the employee is working at the premises of a third party on a temporary basis and that employer provides free or subsidised meals to all their employees.