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Self Employed meals 

If an individual operates as a sole-trader, as opposed to trading through a company, it allows for a simplified structure with fewer formal set up tasks (and costs) and greater flexibility and control. However, differences can arise in how the income and expenditure of a sole trader is calculated, compared to a company.

Tax deductible meal allowances is one such difference, where these can be paid by an employer to an employee, whilst self-employed taxpayers may not be able to deduct meal expenses.

In July Inland Revenue released a 37-page Interpretation Statement, IS 21/06, that discusses the income tax and GST treatment of meal expenses and draws out this distinction. It provides that the reason for this difference is because meal expenditure for a self-employed individual is of a private nature, and therefore non-deductible. This difference in tax treatment reflects the different legal arrangements between a company and a self-employed person.

Before presuming there is an advantage to be sought, consideration should also be given to whether the benefit to the employee could be captured as a taxable benefit and subject to PAYE or FBT.


Please note: The above E-newsletter notes and the related articles on our website are of a general nature and therefore we urge clients who may be affected by these changes to contact us to discuss your specific circumstances before making any changes or drawing any conclusions.

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