2 year rule

[chris79]

Can anyone point me in the direction of the 2 year rule guidelines?

I started a contract under an umbrella in August 2006.

I then moved to a limited company in Feb 07 then relocated in March 07 to a new site approx 10 miles away.

I setup my own new limited company in April 07.

In June 07 the agency I was with gave me notice as a NEW agency took over for the client, so in effect I am now billing a new agency?

With all the mess that has gone on, where does my 2 years start from?

[rawly]

Yes - I think I understand the 2 year rule as it pertains to running one contract in series after another. However, it doesn't explain all scenerios that can arise.

I have a good one, for instance, and am about to enter this situation myself, so if anyone clever could make a comment:

Client A - worked with them for 5 months about 20 miles from my Home. Simple to work out. Mileage to Temporary workplace.

next moved onto to:

Client B - just been working with them for 3 months, they are based 250 miles away from my home, and hence been claiming temp travel and hotel stays and meal allowances for overnight stays.

All well and good. and now here's my next move:

Client A want me back for another 6 months for 'some days' in the week. Client B also want me to stay on a bit longer for 'some days' in the week. So I have now have two parallel contracts, one 20 miles from my offices and one 250 miles from my offices. So, what's the deal? I can't live in both places 250 miles apart (after 2 years) as my permanent place can I? When it comes to the time how do I apply the rules to this?

[malvolio]

The two year rules applies to your personal liability for taxation under BIK rules, and in this case in reclaiming travel costs between your "normal" place of work and your temporary workplace: in practice, your temporary workplace becomes your normal place of work after two years (to be precise, as soon as you know you're going to be there longer than two years), so the clock runs from when you started there regardless of whatever working arrangments were in place.

Furthermore, the current interpretation appears to be (as always, nothing HMRC does or says is clearly defined!) that the above does not apply if you spend less than 40% of your working time at the temporary location, but does apply if you change jobs but still undertake much the same journey to get there.

Simple, really, isn't it...?

[chris79]

my big question here is when must I stop paying myself dividends based on the 2 year rule in my own situation described above, as this is going to be a big deciding factor on when I leave.

[ASB]

my big question here is when must I stop paying myself dividends based on the 2 year rule in my own situation described above, as this is going to be a big deciding factor on when I leave.

Either that is a type or you are confused.

There is no interaction whatsoever between the 2 year rule and any dividends you may receive.

Edit: from your original post as soon as you know you will be there beyond March '09 by the looks of it.

[malvolio]

Either that is a type of you are confused.

Either that is a typo or someone is confused...


But if you really don't know the difference between expenses and dividends, I suggest you go do a bit of reading, sharpish!

[Old Greg]

The two year rules applies to your personal liability for taxation under BIK rules, and in this case in reclaiming travel costs between your "normal" place of work and your temporary workplace: in practice, your temporary workplace becomes your normal place of work after two years (to be precise, as soon as you know you're going to be there longer than two years), so the clock runs from when you started there regardless of whatever working arrangments were in place.

Furthermore, the current interpretation appears to be (as always, nothing HMRC does or says is clearly defined!) that the above does not apply if you spend less than 40% of your working time at the temporary location, but does apply if you change jobs but still undertake much the same journey to get there.

Simple, really, isn't it...?

Malvolio, that's interesting and in direct contradiction to what my accountant told me (they said if the employer changes but the temporary workplace stays the same, then the 2 years resets). I'll now get it in an email from them and take it from there. I'm a bit away from worrying about it now, but it's always good to know all the facts.

[ASB]

Oops

[ASB]

Malvolio, that's interesting and in direct contradiction to what my accountant told me (they said if the employer changes but the temporary workplace stays the same, then the 2 years resets). I'll now get it in an email from them and take it from there. I'm a bit away from worrying about it now, but it's always good to know all the facts.

Some of the wording in the HMRC guidance states:-

"A period of continuous work is defined by paragraph 5(2) Schedule 12A ICTA 1988 as a period of work throughout which the duties of the employment are performed to a significant extent at that place." (my emphasis)

This would support you accountants assertion.

This relates to fixed term appointments but may possibly be useful:-

http://www.hmrc.gov.uk/manuals/eimanual/EIM32125.htm

[THEPUMA]

Booklet 490 provides comprehensive advice. See below.

I'm pretty sure Malvolio is right on this occasion as I vividly recall there being an example in this booklet of someone who worked as a banker in the City of London and moved from one employment to another, continuing to work with the square mile. The example stated that this was treated as a single continuous period of employment.

http://www.hmrc.gov.uk/helpsheets/490.pdf