Travel Expenses – 24 Month Rule Still Lives

Are you over-claiming travel expenses?

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 couple of years, 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.

If an employer requires and employee to work at a place that is not their normal/contracted work place, then the employee would be able to claim travel costs to the temporary work place. If not covered by the employer, then the employee could claim for it via their self-assessment tax return, or a claim to HMRC.London underground sign

To qualify as a temporary workplace, the engagement must be less than 24 months or if the engagement period is unclear, is assumed to be less than 24 months. If it goes above the 24 months in actuality or assumed, then it is not a temporary workplace, but a permanent workplace and travel costs could not be claimed. For example, if it is an 18 month contract and near the end it is extended for a further 12 months, then no expenses could be claimed at the time it is known that the contract will be greater than 24 months onwards. Freelancers may change departments within a client, but as it is the same client, the engagement is treated as one continuous department. Of course, if the location changes significantly, then it will reset the 24 month rule. 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 change of cost.

This rule is being applied to the self-employed going to client sites.Contract, pen and eyeglasses

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 months break and then start the 24 months again.

Now there is a caveat. 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 employee (or freelancer) has spent or is likely to spend, 40% or more of their working time at that particular workplace over a period that lasts, or is 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 ordinary commuting and so is not deductible

People most affected by this : IT Consultants, Social & Care Workers, Peripatetic Teachers, Outsource Bookkeepers plus many other service providers.



It is important to seek advise from an accountant. This post is purely for information and a heads up.

About the Author