Are you over-claiming travel expenses?

Are you over-claiming travel expenses?

The 24 Month Rule.

Now this is a biggie for the employed and self-employed, so pay attention. This has been around since 1998 so it should not be a surprise but it is either ignored or just not known about. It all relates to claiming travel costs to a temporary place of work.

It was brought in for employees, but over the last few years or so, has been heavily looked at in a wider scale for the self-employed and that can have a significant impact to those who provide a service rather than a product.

Let me explain what the rule is first for the self-employed. If a self-employed person is required to work at a location that is not their normal workplace, then the self-employed person would be able to claim travel costs to that temporary workplace. Most self-employed people use their home as their work unless they have an office elsewhere and that is their contacted location.

To qualify as a temporary workplace, the engagement must be less than 24months or if the engagement period is unclear, is assumed to be less than 24monthsunless it can be foreseen to last more than 24 months. In the case of a music teacher going into a school, it is often deemed to be term by term, so when you have reached the end of 6 terms (will not be 24 months by then) and it can be foreseen that they will be going back for the next term, then no travel will be able to be claimed via the self-assessment tax return as it will be over 24 months and deemed to be a permanent workplace, even though there are school holidays.

Engagement does not have to be continuous. The 24-month period starts when you first go to the new location until the end of the engagement even if there are breaks in the middle as that would be a simple way to have a month’s break and then start the 24 months again. You can also be caught out if you are at two schools close by as the costs of travel are the same so deemed the same workplace even though different schools. For example, Windsor Girls School is 1 mile away from Windsor Boys School, completely separate schools but would be considered as one place as the travel costs are the same.

Let’s take a music service engaging self-employed musicians to teach. The 24 months rule may apply to working for the same music service bracket. (Let’s take Kent Music Services) but a teacher could be in Maidstone one day and then Folkestone the next. They would be treated as two very different temporary places of work as there is a significant distance between them. Significant could mean an extra 20 miles or so and not just a couple of extra tube stops in the same zone where there is no charge or cost. (I hope my geography is good and there is more than 20 miles between Maidstone and Folkestone).

To be clear travel expenses that would be disallowed are not only the cost of the journey eg. miles, public transport, tolls, accommodation et cetera but also subsistence. Ouchie!

Now there is a caveat woohoo I like them.

You need to have spent 40% or more of your time at this location for the 24-month rule to apply. The test is whether the self-employed person has spent or is likely to spend, 40% or more of their self-employed working time at that workplace over periods that last or are likely to last more than 24 months. Where that is the case, the workplace is not a temporary workplace and so it is a permanent workplace. Travel between that place and home will be ordinarily commuting and so is not deductible.

Of course, there is always food for thought. HMRC’s view of the starting point for travel and the permanent place of work for musicians’ singers’ actors’ music teachers etc is possibly the rehearsal or concert venue or the theatre itself and therefore no travel could be claimed as it would be deemed ordinary commuting. After all, can you really put on a concert in your living room? Hell yes! I think we have proved that we can do stuff at home over the past couple of years.

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