Coffee shop meetings – tax deductible?

The recent surge in fashionable & popular coffee shops popping up all over towns, villages and shopping centres has led me to realise two things; 1) That I know very little about just how many variations of coffee there are, and, 2) that coffee shop meetings can lead to deep tax based questions from clients.

The sheer volume of new-found coffee shops has led to a growing number of business meetings taking place in such establishments, with business owners meeting prospective clients to discuss business over an ‘Americano’; the formation of new relationships & contacts whilst chugging down a ‘Caramel Latte’.

These meeting are becoming more and more commonplace, and discussing these matters with a client invariably leads to the same question:

Can I claim tax relief on coffee shop expenditure?

The short answer is: “no” – at least where it would be classed as business entertaining. Tax relief may be available in respect to expenditure on subsistence or staff entertaining (subject to satisfying certain criteria), but tax relief on business entertaining is not available.

HMRC class business entertainment as being the provision of free or subsidised hospitality or entertainment offered to a customer or potential customer. Therefore, the purchase of a ‘Frappuccino’ for a customer would be classed as hospitality and therefore, would not attract tax relief.

Is buying a Mocha the same as hiring meeting space?

Some individuals feel that the current rules are unfair and argue that, the purchase of a ‘Mocha’ along with a panini means they are ‘hiring’ space for a meeting – and that the cost of a meeting at a local coffee shop is significantly less than renting a meeting room or office. They may have a point, and ideas have been mooted around that coffee shops could start charging a fixed fee for ‘meeting space rental’ – if an invoice were to show the rental of a meeting room, it should attract tax relief.

No tax relief on coffee shop beverage for now

Under current guidance, when a receipt shows beverages being purchased with or without snacks, HMRC will not grant tax relief and will be on the lookout to ensure that such expenditure is not allowed when computing the taxable profits of the business. Perhaps HMRC will look at this in the future as another part of its tax simplification processes.

Contact Perrys Chartered Accountants for more advice.