What is the 24 month rule and how does it apply to Contractors


The most common expenses to be claimed by contractors are for travel and subsistence.

The 24-month rule allows contractors to claim travel expenses from home to a qualifying workplace, together with subsistence, for up to 24 months. A qualifying workplace assumes the workplace passes a basic "temporary workplace" test. For example:

1. the contract will last less than 24 months

2. the length of the contract is uncertain

3. the length of the contract is less than 24 months, however, if the contract gets extended past 24 months, then from the date of change, travel expenses cannot be claimed

The 24-month rule is calculated from when you first start travelling to your client’s premises from either your home or office, until the end of the contract if it is less than 24 months or until you have reason to believe your contract may last over 24 months. The important point to take note of here is that expenses cease to become allowable at the point you become aware that you will be at the temporary site for 24 months or more, not when you reach 24 months.

For example, Nick started a contract in March 2015 and it was expected to run for 6 months. In September it was extended for a further 9 months until June 2016, if at this stage Nick accepted another 9 months extension, the expenses would become non-allowable as he became aware that he would be on site for 24 months, even though at the time, he hasn’t been.

Another important aspect of the 24 month rule is the term ‘continuous period’. A period of time will be classed as ‘continuous’ even if there has been a break in attendance. For example, if you were to start a new contract with a different agency but on the same client site, the expenses will not be allowable even though there has been a break through the change in agency, there has been no change in the work place.

There are also rules governing the change in workplace. At the time you become aware, or reach 24 months on site and then decide to move to a new contract site, the expenses will only be deemed allowable if there is a ‘significant’ difference in the journey time or cost. Unfortunately, HMRC has not set specific details governing distance between locations.  If we look at the following example: If Clare finishes her contract with a client in Oxford, but three months later starts a new contract with a different end client who is also based in Oxford, her expenses will not be allowable as her commute remains the same.

Making the best of it

As you can see the 24 month rule is fairly complex. However, there may be ways to work around it. If possible negotiate with your agency / client to work on one contract for no more than 23 months. This could be, for example, a 12 month initial contract with a further 11 months extension. Where the contracts ends there, all well and good in satisfying the rules; however, if you undertook a subsequent contract on the same site then HMRC could rightfully disallow the 11 months expenses for “abusing” the rules.

Alternatively, arrange to work less than 40% on site, therefore falling outside of the 24 month rule.

Source: Cogent Accountants

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