Complimentary food!

Emrhino

I'm sure this is not as complicated as I am making it out to be - I have a client who owns a fleet of minibuses which he uses for school runs, social services runs etc. which he invoices to the local council.

He buys sweets, crisps and drinks to go on the buses which he allows passengers to help themselves to.

Can I reclaim the VAT on these items and treat them as a normal business expense? I'm assuming I can treat it all as stock and just make sure the correct 'cost of sales' are included at year end but is it OK to just reclaim the VAT in the normal way? Have confused myself by thinking too much!!...

I think it's because he isn't selling the food on...I need more coffee.

stevef

I think your client needs to rethink his strategy. I do not think either the Local Authority or parents will be happy about stocking his minibuses up with sweets, crisps and drinks. All sorts of issues over dietry control, obesity rates, non tolerance to certain foodstuffs, allergic reactions, triggers for fits, diabetic issues come flooding to mind. Your client would probably like to avoid any of these issues landing at his door.

PGM

Does sound a bad idea. There must be all sorts of issues with feeding them, imagine someone with a nut allergy eats something withs nuts in?!

Although, theres probably no vat to claim back anyway?

Rinske

It sounds like a bad idea for the school runs, but for the social service runs it sounds like a great idea.

Personally, I think it's a really nice gesture and even though I wouldn't suggest it for school kids, for all adult services it sounds very nice. And I do think that people with allergies will have to look out for themselves, shouldn't be that difficult to be sensible about it. There is no protection against stupidity anyways.

Anyways, back to topic, depending on what VAT there is, I see no reason why you wouldn't be able to claim it back, but I never took the tax papers

stevef

Remember adult social services will be transporting around the elderly and frail, clients with mental disorders and those who just want to rail against the establisment amongst others. Just because the social service clients are over 18 does not mean they are capable of looking after themselves or always make rational choices. The social service clients may not be able to work out what is safe or not for them, working on the basis if its provided it must be ok. Those that are being transported are owed a duty of care.

Monsoon

Broadly speaking, food is assumed to be entertaining, unless it's cost of sales. So I wouldn't be so sure that VAT can be reclaimed on those foods that are standard rated as opposed to those that are zero rated.

However, I am with Steve on this - providing unhealthy food is not a great idea on a variety of levels and maybe this is the issue that needs looking at, not the tax treatment.

PGM

Monsoon wrote: »

Broadly speaking, food is assumed to be entertaining, unless it's cost of sales. So I wouldn't be so sure that VAT can be reclaimed on those foods that are standard rated as opposed to those that are zero rated.

However, I am with Steve on this - providing unhealthy food is not a great idea on a variety of levels and maybe this is the issue that needs looking at, not the tax treatment.

I wouldn't class it as entertaining, but improving the main service to differentiate from competitors.

I'm sure airlines don't class it as entertaining?!

PeteLC

Airlines provide their food at an extra cost though (normally built into the cost of the flight with long haul flights) so therefore providing a service to customers and will not be considered entertaining (its only entertaining when you are sitting there trying to figure out what they have put in front of you).

If he was purchasing the food for himself it could be considered as subsistence as he still has to feed himself while out on a job. If that was the case then they would be able to claim back the vat where it was applicable (remember most food is zero rated).

My personal opinion is that he should not be doing it in the first place anyway, it is not part of the overall service he is meant to be supplying and charging therefore he is just letting the kiddies eat his own sweets.

Emrhino

Think I'm with you PeteLC - if he was selling them on to his passengers (which he says he isn't) it would be different.

They are just gifts to customers really aren't they?

Thanks all for your comments - enlightening as always!

PGM

PeteLC wrote: »

Airlines provide their food at an extra cost though (normally built into the cost of the flight with long haul flights) so therefore providing a service to customers and will not be considered entertaining

He could say its built into his cost.

Still seems a daft idea, but if he wants to provide a coach service with refreshments included, then I don't see why he can't from an accounting point of view.

PeteLC

Got to be part of the service he provides though!

Does it state on his invoices that those costs are there or does it just say that he is only providing transport?

andrewtdk

Surely he doesn’t have to itemise every cost for it to be allowable? Granted I don’t pay much attention to hotel bills but I don’t think I’ve ever seen a line for the mint they leave on the pillow when they clean the room but you'd think they will be allowing the cost.

PeteLC

I know what you are saying regarding the mint but that is probably a cost the company absorbs due to the cost of them being almost nothing (think about how many rooms there are and the cost of mints in bulk).

deanshepherd

Crisps aren't that expensive either!

PeteLC

Ah but because crisps are a luxury items and hotels know people like to eat them its a good way to make money for them!

Not many people (none that I know anyway) would go through mints like they do a pack of crisps.

Mints are good in small doses and is always a nice treat but hotels can make a lot more money on crisps.

I might be wrong though as I do not deal with hotels through my line of work!

deanshepherd

Perhaps, but we are talking about minibuses, not hotels.