Help with categorising meals/drinks

lauram
lauram Registered Posts: 50 Regular contributor ⭐
in Bookkeeping
Hi all,
I am part way through my studies so am still learning so please be kind. I am carrying out some work for a local accountant, just categorising transactions from the bank for a few of her clients. I am getting myself confused with food/drink purchases and although I have looked online and asked on some fb groups, there does not seem to be a clear answer and it is stressing me out.

There are a number of clients who have purchased coffee in costa or gregs etc, lunches in a cafe or in sainsburys etc and there does not seem to be 1 clear method for these types of transactions.

They all seem to go to meals/entertainment (depending on the software it is called something different) which I understand, however, someone on fb group said that it should all go to DLA! So that is a question in itself !

it is the tax treatment I am unsure of.

Some seem to have been allocated with no VAT, others exempt and some 20% - surely these should all be treated the same way?

It is my understanding that these transactions are not allowed to have the VAT reclaimed as they are for everyday eating and drinking and not strictly business related, and should therefore be entered into the accounts system as either no VAT or exempt - is that correct and which one do I use?

Any guidance would be very much appreciated.

Comments

  • crispy
    crispy Registered Posts: 468 Dedicated contributor 🦉
    Hi,

    Maybe you can check with client as to whether these are genuine business expenses ? If they are incurred as a result of business travel away from a usual place of work (say to visit a customer or supplier) then I would reclaim VAT on the receipts provided and expense to Travel & Subsistence.

    If these are just food purchased from local shop at lunch time they are probably not business expenses, therefore do not reclaim VAT and code to T9. If this is for a Ltd company and passed through as an expense there is an implication for being a taxable benefit and Class 1A NIC will be due, the alternative is to post to the DLA. If for a sole trader simply disallow the expense.

Categories

Privacy Policy