Can tour operators claim food and drink as business expenses? Sometimes — but not simply because the meal took place while you were working.
Food and drink are an area where ordinary living costs, business travel, employee expenses, client entertaining and the actual cost of providing a tour can easily become confused.
For travel businesses there is an additional complication: the same restaurant bill can have a completely different accounting treatment depending on who consumed the meal, why it was incurred and whether the cost was part of delivering the tour itself.
A director eating lunch while working at their normal office is not the same as an employee buying dinner during an overnight business trip. Neither is the same as paying for a customer’s meal because it forms part of the package the customer purchased.
That distinction needs to be made before deciding whether the expense is allowable.
The first question is: who incurred the food and drink expense?
Before deciding whether the cost can be claimed, establish whether the business is operated through a limited company or by a self-employed sole trader. That matters because the tax rules are not identical. A director of a limited company is generally considered under the employee travel and subsistence rules when travelling in the course of their employment. A sole trader is considered under the rules applying to expenditure incurred in carrying on the trade.
The fact that both people happen to own travel businesses does not make the underlying tax rules interchangeable.
This was one of the problems with the previous version of this article: it used the language of temporary and permanent workplaces while also discussing self-employed traders as though the same rules applied universally. They do not.
Food and drink for directors and employees travelling on business
Where a director or employee undertakes qualifying business travel, necessary subsistence incurred as part of that journey can also qualify.
For example, an employee who has to travel to a temporary workplace and purchases a meal because of that journey may be able to have the cost reimbursed by the company without the reimbursement becoming taxable remuneration, provided the relevant conditions are met.
The important point is that the meal follows the qualifying business journey.
You cannot turn an ordinary lunch into a business expense merely because you discussed work while eating it.
Similarly, travelling between home and a permanent workplace is normally ordinary commuting. The fact that somebody happens to buy breakfast, coffee or dinner on the journey does not convert those personal costs into business travel expenses. HMRC expressly treats travel between home and a permanent workplace as ordinary commuting.
A temporary workplace is broadly somewhere an employee attends to perform a task of limited duration or for another temporary purpose, although further rules — including the 24-month rule — can affect that status.
For most small travel businesses, the practical lesson is simpler: record why the journey occurred before deciding that the meal is allowable.
Tour Operator Food and Drink Expenses While Travelling
What about the £5, £10 and £25 meal rates?
This is where the old article definitely needed correcting.
The £5, £10 and £25 figures are not a general self-employed daily food allowance.
They are HMRC benchmark scale rates which employers may use in appropriate circumstances when paying or reimbursing employees for qualifying subsistence. The current domestic benchmark rates include £5 where the minimum qualifying journey lasts five hours, £10 for ten hours and £25 where the qualifying journey lasts at least 15 hours and is ongoing at 8pm. Employers using the regime must still satisfy the underlying travel and subsistence conditions and maintain an appropriate checking process.
In other words, a sole trader cannot simply count the number of hours they were away from home, multiply them by an HMRC meal rate and put the result through the accounts. That is not what those rates are for.
What can a self-employed tour operator claim?
For a self-employed trader, ordinary food and drink are normally treated as personal living costs because everybody has to eat whether they are working or not.
HMRC does, however, permit reasonable food and drink expenditure in certain business-travel situations. The HMRC guidance on travel and subsistence for traders clarifies that point.
This can include qualifying expenditure where the trade is itinerant, where the trader makes an occasional business journey outside their normal pattern of travel, or where a business journey requires an overnight stay.
That distinction matters particularly in travel.
A self-employed tour operator who regularly works from the same location cannot automatically claim their normal lunch simply because they happen to be working that day.
By contrast, somebody who travels away as part of a qualifying business journey, or whose business genuinely requires itinerant travel, may have a different position.
The circumstances of the journey matter more than the existence of the receipt.
Ordinary meals are still ordinary meals
This is the least exciting rule and probably the most useful one. Buying lunch while working does not in itself create a business expense. Neither does buying a coffee while answering emails. Nor does arranging to meet somebody in a café automatically transform your own food into a deductible cost.
The starting point is still whether the expenditure is genuinely attributable to qualifying business activity under the relevant rules.
That is why I would be cautious about accounting categories labelled simply “subsistence” where everything involving food has gradually been placed there without anybody considering why the cost arose.
Good bookkeeping should preserve enough information for that question to be answered later.
Tour Operator Food and Drink Expenses: Entertaining and Promotional Events
Client entertaining is different again. Taking a client, supplier or prospective customer for dinner may be completely genuine business activity. That does not make the expense deductible for Corporation Tax or Income Tax purposes.
HMRC’s general rule is that business entertainment expenditure is not allowable against trading profits, subject to specific exceptions.
So:
“I took a prospective customer to dinner because I hoped to win a £20,000 booking”
does not become:
“therefore the restaurant bill is tax deductible.”
There may be an entirely sensible commercial reason for incurring the cost while the tax legislation nevertheless disallows it. That is why bookkeeping and tax treatment are not the same exercise. The transaction should still be recorded correctly in the accounts. It may then require adjustment for tax purposes.
Promotional events do not make the hospitality automatically allowable
This is another area where the previous article went too far.
Organising an event to promote your tours does not automatically make the food and drink provided at that event deductible.
HMRC distinguishes between the direct cost of publicising the business or its products and the hospitality provided as part of the event.
Direct promotional expenditure may be allowable. Food, drink and other hospitality provided to guests are generally caught by the business-entertaining restriction. HMRC does state that where hospitality is merely minimal, no disallowance need be made.
So simply describing an event as “marketing”, making attendance free or adding a presentation does not turn substantial hospitality into an allowable advertising cost.
The substance of the expenditure still matters.
Food supplied to customers as part of a tour is a completely different issue
This is where travel businesses need to be particularly careful.
Suppose a tour operator pays a restaurant to provide lunch to travellers because lunch is included within the tour the customers have purchased.
That is not the same transaction as the tour operator taking a prospective client to lunch.
The business is purchasing something that forms part of what it is supplying to its paying customers.
HMRC’s business-entertaining rules recognise that hospitality provided in the ordinary course of a trade for payment can fall outside the normal entertainment disallowance.
For a travel business, however, that does not mean the analysis ends there.
A meal, accommodation, transport or another service bought for travellers may also affect the VAT and TOMS treatment for the travel business.
That is a separate question from whether the expense is deductible in calculating trading profits, and the accounting records need to distinguish the two.
This is one reason I do not like generic bookkeeping categories being used for travel companies without considering what the transaction actually represents.
A restaurant bill could be:
- the director’s private lunch;
- qualifying employee subsistence;
- self-employed business-travel subsistence;
- disallowable client entertaining;
- hospitality at a promotional event; or
- a cost incurred in delivering a paid tour to customers.
It is still a restaurant bill in every example.
Its accounting and tax treatment is not necessarily the same.
What records should a tour operator keep?
A receipt tells me how much was spent. It does not necessarily tell me why it was spent.
Where food and drink costs relate to business travel, I would want the accounting record to make the commercial context identifiable: the date, purpose of the journey, location, who incurred the expense and, where relevant, the tour or departure to which it relates.
Where another person was entertained, record who attended and the business reason rather than quietly calling the transaction “travel expenses”.
And where meals are purchased for customers as part of a tour, those costs should remain identifiable within the travel accounting records rather than disappearing into a general meals-and-entertainment account.
That becomes particularly important where VAT and TOMS treatment for travel businesses is involved.
So, can tour operators claim food and drink as business expenses?
The answer is not simply yes or no.
Some food and drink costs are ordinary personal expenditure.
Some arise as part of qualifying business travel.
Some are business entertaining and therefore disallowable against profits despite having a genuine commercial purpose.
Some promotional costs may be allowable while the associated hospitality is not.
And some food supplied to travellers is part of the very service the tour operator is selling, which creates a completely different accounting and VAT question.
The important thing is not to categorise the expense based on the fact that somebody ate something.
Categorise it according to why the expenditure arose and what role it played in the business.
For travel agents and tour operators, that distinction matters because bookkeeping decisions can flow through into the year-end accounts, taxable profit and, where relevant, TOMS.
If your accounting records do not make those distinctions clear, correcting them later is considerably less pleasant than recording them properly in the first place. For a wider overview, see our guide to allowable expenses for UK travel businesses.
When Can Tour Operators Claim Food and Drink as Business Expenses?
Tour operators can claim food and drink as business expenses in some circumstances, but the tax treatment depends on why the cost was incurred and whether the business is operated through a company or as a sole trader.
Specialist accounting for tour operators
LAS Accounting works exclusively with UK travel businesses, including tour operators operating under principal and agent models.
We structure the bookkeeping so that travel-specific transactions remain identifiable throughout the year and review the accounting, VAT and TOMS treatment as part of the wider compliance process.
If you are looking for specialist accountants for tour operators, you can apply for ongoing accounting support through our website.
