Businesses that foot the bill for their staff, whether for sandwiches or a slap-up meal, could find a nasty surprise on the menu.

New tax rules and tougher enforcement by revenue inspectors could be a recipe for disaster, making working lunches something to be avoided, warns Brighton-based tax expert Matt Coward.

The Inland Revenue now regards meeting colleagues over a meal in or near the office as a benefit in kind that should be taxed through the payroll.

Along with companies that pay their employees' home telephone bill in full, working lunches provide the PAYE inspector's richest pickings, warns Mr Coward, tax director at BDO Stoy Hayward.

Up to 20 per cent of larger firms never audit their payroll and expenses procedures. Of those that do, one in four has uncovered potential tax liabilities of £5,000 to £500,000.

Mr Coward said: "Sussex businesses that fail to audit their payroll and expenses could be left with a nasty taste in their mouth after an Inland Revenue compliance visit.

"The inspectors have the power to look back over the past six years' payroll, so even small errors can mount up over time."

Businesses are responsible for paying any tax they should have collected from employees via PAYE.

One of the most frequent mistakes is to treat working lunches the same as subsistence while travelling or entertaining clients, which are generally not taxable as benefits in kind.

Another regular blunder is to pay all of an employee's home telephone bill, forgetting there will have been at least some private use.

Sussex businesses are urged to keep abreast of changing legislation and to speak to their advisors if they are not certain of their responsibilities.