SE21675 - Benefits: subsidised meals on the employer's premises or in a canteen

Extra Statutory Concession A74

Extra Statutory Concession ESC A74 exempts the provision of meals for directors or employees in a number of situations which are not covered by the statutory exemption in Section 155 (5) ICTA 1988 ( SE21671). The text of the concession is as follows

"Income tax is not charged on the benefit to an employee of free or subsidised meals provided by his employer on the employer's business premises, or in any canteen where meals are provided for the staff generally, or on the use of any ticket or token to obtain such meals, if-

• the meals are provided on a reasonable scale and
• either

The concession does not apply, in the case of a hotel, catering or similar business, to free or subsidised meals provided for its employees in a restaurant or dining room at a time when meals are being served to the public, unless part of it is designated as being for the use of staff only.

The concession also applies to light refreshments as it does to meals."

Note that the concession applies if all employees of the employer concerned may obtain a free or subsidised meal. There is no requirement that all the employees actually do obtain meals, whether frequently or infrequently. The opportunity for all employees, at some time or other, to get a free or subsidised meal is enough to meet the terms of the concession. However, if that opportunity is not open to all the employees, that is some employees do get the opportunity to have a free or subsidised meal but others do not, the concession does not apply, unless those others are given free or subsidised meal vouchers.

For employers with more than one site, the concession applies if all employees have the opportunity to enjoy a free or subsidised meal. It may be that free or subsidised meals are not available at every site but if an employee at a site where the facility is not available could enjoy a free or subsidised meal if they were visiting one of their employer’s sites where the facility is available, the terms of the concession are satisfied.

Note also that the concession applies to meal vouchers only to the extent that those vouchers are tickets or tokens used to obtain meals on the employer's business premises or in a canteen open to the employees generally. It does not apply to meal vouchers used to get meals elsewhere. Such meal vouchers are the subject of a separate concession ( SE16210).

The concession covers most of the ways in which a company might provide free or subsidised meals for its directors or employees, either in a canteen or on the business premises, so long as meals or meal vouchers are available for the staff generally. If the concession applies then all meals on a reasonable scale ( SE21676) provided on the employer's premises are exempt from tax. This means that if all employees may get a free or subsidised meal on the employer's premises or in a canteen, or meal vouchers, then working lunches on a reasonable scale, provided on the employer's premises, will also be exempt even if not all of the employees get the working lunches.

See SE21677 for examples of how the concession works in practice.