Quick answer
A meal you buy while travelling on business away from your normal workplace is tax deductible and the VAT is reclaimable. Entertaining a client is never deductible for tax and the input VAT is blocked. Staff events such as a Christmas party are deductible and tax-free for employees up to £150 per head per year, provided the function is open to all staff.
Are business meals tax deductible in the UK?
The answer turns entirely on who the meal is for, which is the single most important distinction in UK meal claims. HMRC splits meal spending into three buckets, each with a different tax outcome.
Subsistence is a meal you buy because business has taken you away from your normal workplace, for example lunch on a site visit or dinner while staying away overnight. Subsistence is fully deductible and the VAT is reclaimable. Client entertainment is hospitality for someone outside your business. It is a real cost but it is specifically disallowed for corporation tax and the input VAT is blocked. Staff entertainment is hospitality for your own employees, which is deductible and within the annual events exemption is also tax-free for the staff.
How much can you claim?
There is no fixed daily cap on subsistence in the UK; the test is that the cost is reasonable and genuinely incurred while travelling for business. HMRC does publish benchmark scale rates employers can use to reimburse staff without receipts, but most bookkeepers reimburse actual receipted amounts.
For staff functions, the exemption is £150 per head per year across all annual events combined. This is an exemption, not an allowance: if the cost per head reaches £150.01, the entire amount becomes a taxable benefit reportable on a P11D, not just the excess pound.
Worked example. You take a prospective client to lunch for £90 including £15 VAT. None of it is deductible and you cannot reclaim the £15. Separately, your firm holds a summer party costing £120 per head and a Christmas meal at £80 per head. The combined £200 exceeds the £150 limit, so you nominate the £120 summer party as exempt and the full £80 Christmas meal becomes a taxable benefit.
Record-keeping requirements
Keep the itemised receipt for every meal, note who attended and the business purpose, and flag whether it is subsistence, client entertainment, or staff entertainment at the point of capture. The “who and why” note is what protects a subsistence claim on enquiry. Records must be kept for six years for VAT and for the year-end retention period for income or corporation tax.
How to claim, step by step
- At capture, classify the meal as subsistence, client entertainment, or staff entertainment.
- For subsistence, code it to travel or subsistence, reclaim the input VAT, and deduct it in full.
- For client entertainment, code it to entertainment, reclaim no VAT, and add it back in the tax computation.
- For staff entertainment, code it to staff welfare and track the running annual total per employee against the £150 limit.
- Attach the itemised receipt and the attendee note to each transaction.
- At year end, confirm no employee has breached the £150 function limit before finalising the P11D position.
Common mistakes
- Reclaiming VAT on client entertainment. It is blocked for UK and overseas clients alike.
- Treating a client lunch as deductible. It is added back when calculating taxable profit.
- Letting staff functions creep over £150 per head, which makes the whole amount taxable rather than just the excess.
- Coding subsistence as entertainment, which needlessly forfeits a valid VAT reclaim and deduction.
- Claiming meals at your permanent workplace as subsistence.
Software that helps
The classification has to happen at capture, because nobody can reliably reconstruct who was at a lunch three months later.
- Dext prompts for an attendee note and entertainment flag as receipts are scanned.
- ExpenseFlow reads the receipt, applies the correct VAT treatment, and flags meals that look like client entertainment rather than subsistence so the input VAT is not wrongly reclaimed, then syncs the coded transaction to Xero.
- Pleo ties card spend to a category prompt so meals are coded the moment the card is tapped.
FAQ
See the answered questions above for subsistence versus entertainment, the £150 staff limit, VAT on client meals, workplace meals, and recording team lunches.