Who this is for
Restaurant, cafe, catering, hotel and food-service owners, and anyone whose business includes feeding customers. Also drivers and businesses with staff events.
The five situations
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Food and drink you sell to customers: full cost of sales. Ingredients, beverages and the cost of meals served are deducted in full through cost of goods sold. The 50% limit is not meant for them.
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Meals you buy for yourself or clients elsewhere: 50%. A supplier lunch at another restaurant, a coffee meeting, event tickets for a client. The usual limit applies to the business, restaurant or not.
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Staff events: full deduction, up to six a year. A party or meal where all employees at a location are invited can be deducted in full, for up to six such events a year. A dinner for managers only does not qualify.
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Staff meals during shifts: check the arrangement. Meals provided to employees can be a taxable benefit to them in some cases and an ordinary cost in others. How it is set up matters. Ask before assuming.
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Long-haul truck drivers: a higher rate. Meals during eligible long-haul trips are deductible at 80%, not 50%. That is for drivers meeting the distance and duration tests, not for the restaurant feeding them.
One thing many people do not realize
A restaurant’s food cost is not a meal expense. The 50% limit is aimed at a business buying meals for itself, its owners or its clients. When providing food and drink to customers is what the business does, that cost is deducted in full as cost of goods sold. The 50% limit still applies when the restaurant’s owner takes a supplier out for dinner somewhere else.
What to prepare
- Food and beverage purchase records, separate from other expenses
- Receipts for meals bought outside the business, with the purpose noted
- A list of staff events in the year and who was invited
- Your current treatment of staff meals
When professional help may make sense
If past returns applied 50% to food cost, the business has been overpaying tax. If staff meals have never been looked at, there may be an unreported benefit. Both are worth a review.
How Rex Tax may be able to help
We prepare returns and books for restaurants and food businesses and apply the rules to each type of cost. Our guide on delivery app deposits covers the revenue side.
Official sources
This guide is general information, not advice about your situation. It reflects the rules for the 2026 tax year. It has not yet been reviewed by a practitioner. The information was checked against the official sources listed above on the date shown. Rules change. Check the official sources above or ask us. How we prepare these guides.