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.