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Guide to Business Expenses 24 Month Rule

Business Expenses - The 24 Month Rule

Your ability to claim any of these travel and subsistence expenses relies on you traveling to a temporary workplace. HMRC defines a temporary workplace as one that you attend “for the purpose of performing a task of limited duration or for some other temporary purpose”. They go on to say that a workplace is considered permanent when you “attend it in the course of a period of continuous work that lasts, or is likely to last more than 24 months”.

Contractor's Guide to Travelling for Work and Working from Home >>

This means that if you work, or expect to work, at a given location for more than 24 months, you can’t treat it as a temporary workplace and travel and subsistence claims are no longer allowable. It’s important to consider the expectation as well as what has happened, so for example:

Imagine your current contract is to work at location A for 12 months. You haven’t worked at or near this location before and you expect to move on to another project at a different location after this contract. At this point, Location A is a temporary workplace so travel and subsistence can be claimed. 9 months into this contract, you negotiate an extension lasting 13 months. You now expect to work at Location A for a total of 25 months and must treat it as a permanent workplace. You can no longer claim travel and subsistence expenses when you attend Location A. You would have to stop claiming from the day the negotiation was completed, as this is when your expectation changed. You can still claim for the first 9 months when you legitimately expected your time at Location A to end after the first year. 

The 24-month rule relies on the definition of a temporary workplace. It doesn’t matter who your client is, or what role you are doing. If you work for a different client, on a different contract doing something completely different, but you’re still at the same location, you’ll still be caught by the 24-month rule. 

We are often asked by Contractors who move from Umbrella employment to running their own Limited company if this resets the clock? The simple answer is no. Since the 24-month rule relies on the definition of a temporary workplace, who you “work” for is irrelevant.

Changing Location

From the above rules, changing location would appear to solve the problem, and it does if the new location is far enough away from the current one. In order to reset the 24-month rule, the change of location has to have a “significant effect” on your journey to work. To claim there has been a significant effect you should be able to demonstrate a substantial change in your journey time and or costs of travel. So, moving on to a new contract in the same building, the same street, or even near to the same tube station, may not reset the 24-month rule. 

Working at more than one location

If you work at a new location and then return to a previously attended workplace you will need to consider if the 24-month rule applies. In this situation, you need to look at the last 24 months and ask if you have spent 40% or more of your time at that particular workplace? This is best explained by an example. A person is at a workplace for the full 12 months ended 31 October 2017 and returns on 1 November 2018 – over the previous 24 months 50% of the working time has been spent at the workplace –the claim, as from 1 November 2018, fails. Compare that with a person who spends 6 months ended 31 October 2017 and returns on the 1 November 2018. Over the previous 24 months 25% of the working time has been at the workplace so a claim will succeed but as time goes on the % will change. If that person is still at the workplace on 1 November 2019 then over the previous 24 months 50% of the working time will have been spent there and the claim will fail – somewhere between the two dates the % hits 40% and it is at that point that the claim will fail.

If you feel you need more advice about your expenses, or if you have any questions about what you can claim, please Call Orange Genie Accountancy today  01296 468 185 or email accountancy@orangegenie.com. One of our friendly and experienced accountants would love to help you.

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