Meal claims for self-employed
Inland Revenue (IR) have recently clarified their rules for self-employed people and your ability to claim meals. This includes meals where you are away on travel and entertaining clients. Note this is not new legislation, it is simply the IR clarifying their position based on legislation we’ve had for years.
In short, self-employed people cannon claim meal costs, except in very specific circumstances. We provide a table at the end showing common scenarios but read on for some detail.
In general, you can claim costs associated with your business unless they are personal in nature. IR have clarified that food & beverages for yourself is personal because you have to eat to survive. Being away in another city specifically for work doesn’t change the fact that eating and drinking is required to live.
To give some context, self-employed means all the following:
- People operating as a sole trader
- People operating through a partnership
- People operating through a Look Through Company (LTC)
As a self-employed person, you can claim meals & beverages only where you had no choice but to purchase a meal because of the remote nature of where you are. Simply being away from home isn’t enough. If you travel to another city for example, the IR’s view is you can easily purchase normal food and prepare this for yourself as you would at home. However, even if you had no choice but to purchase a meal, the cost you can claim is then limited to the additional cost you incur. This means you need to work out the cost of a standard meal for yourself first, & then only claim the difference.
If you have employees, you can continue to claim these costs for them (subject to entertainment & other rules for things such as Christmas functions). The reason you can claim these costs is there are specific parts in the legislation allowing you to claim costs for employees.
In most cases, if you are operating through a company (other than an LTC) you can still claim these meal costs provided they are based on your work. You can claim these because you are technically an employee of the company.
If you would like to read through the detail yourself, you can do so on this link: https://www.taxtechnical.ird.govt.nz/interpretation-statements/2021/is-21-06
Or by searching “Inland Revenue IS 21/06”.
As always, we are here to help so reach out in need.
|Scenario||Likely income tax treatment of the expenditure, allowance or reimbursement||Amount||
|Shouting friends Friday night drinks at the local pub||Not deductible||N/A||Example 3 (variation 2)|
|Expenditure on meals and coffee while working at different places around town||Not deductible||N/A||Example 1 (variation 2)|
|Expenditure on meals and snacks while away overnight on business||Not deductible||N/A||Example 1 (variation 3)|
|Expenditure on meals while working in a remote location||Deductible provided you have no choice but to incur the extra expense||Reasonable estimate of extra cost||Example 1 (variation 4)|
|Reimbursing or paying an allowance to your employee for meals and snacks they consumed while away overnight on business||Deductible for employer (and not taxable for employee)||Full amount||Example 1 (variation 5) and Example 2|
|Employees and shareholder–employees|
|Employee receives an allowance to cover light refreshments while working away from the office||Not taxable for employee as amount is exempt income and not subject to fringe benefit tax (and deductible for employer)||Full amount||Example 2 (variation 1)|
|Employee is reimbursed for meals eaten while out of town on business||Not taxable for employee as amount is exempt income and not subject to fringe benefit tax (and deductible for employer)||Full amount||Example 2 (variations 2 and 3)|
|Self-employed person provides hospitality for clients||Deductible||50% of expenditure||Example 3 (variation 1)|
|Self-employed person arranges a hospitality function for clients and a visiting employee from out of town||Deductible – the hospitality for clients and the employee’s meal come under the entertainment expenditure rules||50% of expenditure||Example 4|