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The 24-month rule and how it affects travel expenses | PayStream

Under tax rules going back more than 20 years, contractors who work at a series of temporary workplaces have been able to claim tax relief for the cost of home to client workplace travel. The rules distinguish the position from normal home to permanent workplace commuting costs which are not eligible for tax relief.

However, this exceptional relief has several restrictions, a key one of which is that a ‘temporary workplace’ can only be so regarded if the period of work there does not last or is not expected to last for more than 24 months. If it does, then it is considered to be a ‘permanent workplace’ and no travel expenses will be allowable for tax purposes.

This seems straightforward if, say the engagement is for a definite period of 6 months but many contractors are offered the opportunity to extend or roll over their contract. If the contract was extended to take it beyond the 24-month period then tax relief on the travel costs ceases from the time at which it is known that the working period will stretch beyond 24 months.

Breaks in engagements with the same end client and at the same workplace can’t be used to sidestep the rule because the period of 24 months applies from the start of the engagement. If the contractor has spent 40% or more of their time at the client work site within the 24-month period, even if there were breaks, tax relief on expenses is prohibited.

Some contractors may be asked by a client to move their work locations during their contract term. On the face of it, that seems to be a change of workplace and the 24-month rule clock would restart. However, it’s not that simple. There must be a significant change to a contractor’s journey in time and cost. For example, a car journey of 5 miles turning into one of 30 miles would be regarded as significant, whereas one involving an additional 2 stops on the Tube within the same zone would not.

FAQs

My contract term is undefined, but I have a 6-month review to see if it is going to be rolled forward. Can I claim tax relief on the travel costs?

You can claim relief on your expenses until you know or have a reasonable expectation that your engagement will not last for more than 24 months.

What travel expenses can I claim for?

If you are eligible under these rules travel expenses include not only the actual cost of the business journey but all other associated costs such as food and accommodation, vehicle hire charges parking etc. Ensure that you keep physical or electronic records of this expenditure.

What sort of records of mileage in my own car do I need to keep to claim travel expenses?

Your mileage log can be a list of the dates travelled; where from and to, distance travelled and purpose of journey.

My contract requires me to spend some time overseas. Can I claim the travel and accommodation costs involved?

Tax relief is available on overseas travel in the same way as travel within the UK, tax relief can be claimed on any travel, accommodation and subsistence incurred on the journey or for the duration of the stay. Ensure that you keep full records. Depending upon the nature of your contract these trips abroad, if relating to time spent at your client’s overseas workplace may constitute a different ‘temporary workplace’ when reviewing the 24-month period.

I’ve been working for a client for more than 24 months and so not claiming home to office travel expenses. The client has asked me to make occasional trips from my normal central London workplace to outlying offices. Can I claim these travel costs?

On the face of it, it seems that your central London workplace is your permanent workplace and that, unless your client is already reimbursing you for the costs of these trips to the other outlying offices, you should be able to claim tax relief on the expenses you’ll be incurring. These are not expenses incurred under the temporary workplace rules but under the main travel between places of work rules (Section 337 ITEPA 2003).

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The 24-month rule on expenses can be confusing, but if you're in any doubt, we're here to advise.

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