HMRC rules say that if you provide free or subsidised food and drink for your workers they won’t be taxed as receiving a perk. However, limiting the value of what you provide can nullify the exemption. What’s the problem and how can you avoid it?

Eat, drink and be exempt

HMRC is a little coy about the tax and NI exemption which applies to free or subsidised food and drink provided by employers in the workplace. For example, under the tax-free benefits heading on GOV.UK it says “You can get some company benefits tax free, including: meals in a staff canteen, hot drinks and water at work…” It’s always seemed odd to us that HMRC specifies “staff canteens” when actually the exemption can apply to all meals and drinks of a “reasonable scale” provided in the workplace.

Trap. The meals etc. must be available to all employees and directors at the same workplace or the exemption doesn’t apply.


Our subscriber wants to reduce the time workers spend in the kitchen/rest area ostensibly eating, but actually spending time catching up on last night’s TV. Instead, he wants to place a few vending machines around the factory, which he hopes will stop workers congregating. In itself this doesn’t pose a threat to the tax and NI exemption, but the method of obtaining a snack or drink from the machines potentially does.

Portion control

To avoid some workers abusing the system our subscriber intends to issue each one with a card which would allow a notional value of food and drink per day. After they have used the allowance the workers could pay for snacks with their own cash. That sounds like a reasonable plan, but not according to HMRC. Its internal guidance says that the exemption would not apply in this situation, despite the legislation allowing for employees to obtain “the food and drink by means of a voucher, ticket, pass or other document or token” .

What’s HMRC’s problem?

HMRC’s objection is that if a financial limit is placed on the value of food or drink an employee can obtain, which they can use at their discretion, it actually represents “money or money’s worth”. When this happens HMRC says the card falls outside the general meaning given by tax law of a voucher, token etc. and is in effect cash. As a result, it says the food subsidy provided via the card is earnings liable to PAYE tax and NI.

Trap. HMRC’s view applies equally to any arrangement where an employee is given a “pool” of value which they can spend on workplace meals, not just in vending machines.

Is there a solution?

While HMRC’s view is highly questionable and definitely not within the spirit of the exemption, the safest option for our subscriber is to find an alternative system.

Tip. Oddly, HMRC will accept that the exemption applies if the card etc. limits the number (but not the value) of items, a worker can take per day. With a bit of organisation our subscriber ought to be able to set up vending machines to reasonably achieve his goals.

This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit or call 01233 653500.