The 24 month rule: A Guide..
According to HMRC, contractors are entitled to claim travel and subsistence expenses if their workplace is considered temporary. This is designed for contractors whose professional position requires them to travel between sites during the course of their contract.
The 24 month rule is a legislation based upon two classifications: temporary and permanent.
If your ‘workplace’ is temporary...
As a contractor, you are permitted to claim your travel and subsistence expenses if your workplace is considered temporary. Your workplace will only be considered temporary if you are employed for a limited duration – less than 24 months.
On the other hand, if your contract of over 24 months changes to a duration of less than 24 months (e.g. your contract is shortened), then you can initiate a claim for travel/subsistence expenses at the point when the change occurs.
If you spend less than 40% of your time at a workplace, your location will be considered temporary even where the duration is for more than 24 months.
If your ‘workplace’ is permanent...
Conversely, if your contract lasts longer than 24 months, your workplace will be considered permanent. In this case, you will not be able to claim for your travel and subsistence expenses.
This is determined by two fundamental factors:
|The assigned duration persists or exceeds over 24 months||AND||You spend over 40% of your time at a particular workplace|
Example 1: Temporary vs. Permanent workplace
You spend 28 months in Location A and one day a week for 29 months in Location B.
In this scenario, Location A remains permanent since the length of the contract has exceeded 24 months, thus travel and subsistence expenses cannot be claimed. Location B is temporary since you spend less than 40% of your working time at this particular workplace, thus you can claim travel and subsistence costs.
In the above example its irrelevant that the employee has spent more than 24 months at location B. HMRC states that for the 24-month rule to apply, both legs of the test must be met; for a workplace to be deemed permanent, the employee must have spent or be likely to spend more than 40% of their working time at a workplace and they must attend it or be likely to attend it over a period lasting more than 24 months
Example 2: Change of Contract Term
Your workplace can transition from being temporary to permanent at any point in time. For example, your initial contract of less than 24 months can be prolonged to exceed the limited duration. In this case, the transition will be applied from the date the change is expected. Once the changeover from a temporary to a permanent workplace is confirmed, therein you can no longer claim travel and subsistence costs.
Resetting the clock: 24 month rule
If you are caught by the 24 month rule, you may be able to start claiming travel and subsistence expenses in the future if significant changes have been made to your daily commute. There is no official definition for what a ‘significant change’ comprises of; this will be determined on a case-by-case basis. In an instance where the 24 month clock resets, you can regress to the 40% rule where you will need to assess the length of time you will be away from that location to be able to claim travel and subsistence expenses in the future.
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