Summary
- Free or subsidised staff meals can be tax-free even without a canteen, provided they are served on the employer’s premises.
- To qualify, meals must be provided on a reasonable scale and be available to all employees at that location.
- The exemption does not apply where meals are limited to selected staff or offered through salary sacrifice/flexible benefits.
- Employers can provide different standards of meals to different employees, as long as everyone has access to some form of free or subsidised meal.
You run a small consultancy company and treat your staff to lunch in the office once a week. Your bookkeeper says it’s a taxable benefit in kind because staff lunches are only exempt if they are provided in a workplace canteen. Is this correct?
Hidden exemption
Whilst it is true that free or subsidised meals at a workplace canteen are exempt from income tax and NI, that isn’t the full story. You would be forgiven for thinking that it was as simple as canteen = yes, everything else = no, because on GOV.UK under the heading “What’s exempt” it only mentions canteens and vouchers to use in a canteen.
However, despite HMRC not advertising it, there is another way to provide your employees with a tax-free meal.
Don’t listen to HMRC
The legislation states that the exemption applies to free or subsidised meals if they are provided:
- in a canteen; or
- on the employer’s business premises.
So, lunches served up in the office are also exempt. After all, it would be rather unfair if the exemption was restricted to businesses that could afford to pay for a canteen. There are several other conditions to meet to qualify for the exemption.
Conditions
If meals are served on your business premises, conditions A and B below must be met.
Condition A. The meals are provided on a reasonable scale.. HMRC’s internal manual warns that this condition shouldn’t be applied too narrowly. A modest meal with a glass of wine is perfectly acceptable.
Condition B. That all employees or all of them at a particular location, e.g. a particular branch office, may obtain either a free or subsidised meal and/or a free or subsidised meal voucher or token.
It’s not necessary for all employees to receive the free or subsidised meals, just that they are offered them. The exemption won’t apply if the meals are provided as part of salary sacrifice or flexible remuneration packages.
All employees
Meals that don’t meet the conditions for exemption, e.g. because they are not available to all employees, including directors, are taxable benefits.
Example. Acom Ltd’s sales team has lunch together each Friday to discuss the results from the past week. The sales director orders lunch using a company credit card, and they eat together in a meeting room. The customer service team are working at the same location but are not invited to the meeting and are not offered lunch. The exemption does not apply because some staff are not able to obtain a free meal.
Special treatment
Although all staff need to be able to obtain a free meal for the exemption to apply, they don’t need to have the same meal or same standard of meal.
Example. The directors of Acom Ltd have a buffet at their monthly board meeting which is provided by a catering company and costs £30 per person. The rest of the staff are given vouchers to get a sandwich and drink from a local shop. The supervisor orders and collects the meals so everyone can eat together in the staff kitchen. The vouchers are worth around £5 per person. The exemption applies because all the employees of the company either get a free lunch or meal vouchers.
