Be clear on the 24 month rule on claiming travel

Contractors travelling to and from a client’s site must comply with HMRC’s temporary workplace rules if they wish to claim travel and subsistence expenses against their taxable profits. In general if travel is allowable then subsistence is too.

“A workplace is a temporary workplace if an employee goes there only to perform a task of limited duration or for a temporary purpose”.

Test requirements

The test is whether the employee has spent, or is likely to spend, 40% or more of his or her working time at that particular workplace over a period that lasts, or is likely to last, more than 24 months.

Where the test is met; the workplace becomes a permanent workplace and travel between that place and home will be ordinary commuting and is not tax deductible.  Therefore the employee must personally pay for their travel costs to the workplace.

Watch out, as consecutive assignments in the same area are treated as a single workplace, even though you may be working for different clients. Your journey to work must change significantly for your workplace to change.

Key points to remember:

Travel from home to a normal place of work is not tax allowable. To be a normal place of work, frequency and permanence must be present:

  • Frequency is established when 40 per cent or more of an employee’s time is spent at a particular location.
  • Permanence is established when a 24-month placement is expected at a particular location.

Once the expected length of time at the temporary workplace exceeds 24 months then tax relief for travel is immediately withdrawn, but expected permanence that is later terminated cannot be retrospectively claimed for.

Contractors incorrectly claiming expenses and subsistence could face back taxes, interest and penalties if their error is discovered by an HMRC inspector during the course of a routine inspection. Get in touch today if you have any concerns.

Please visit The 24th month rule for further information from HMRC.

If you would like help with any aspect of the HMRC rules for claiming travel, please contact Jessica.

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