Reply to: Travel expenses after 24 month rule

[pr1]

To that extent HMRCs guidance is sufficient. It’s measured as 40% of your time over a 24 month period. Either as a matter of fact or if there is an expectation that you will.

If you do not expect to spend more than 40% of your time on site within a 24 month period at any time then you can carry on claiming.

So as long as you're on site less than 67.2hours per week you're golden :-P

[TheCyclingProgrammer]

You are right, the 40% rule is not legislation, it is an HMRC guideline for how they interpret the meaning of “significant extent” in the legislation above.

To that extent HMRCs guidance is sufficient. It’s measured as 40% of your time over a 24 month period. Either as a matter of fact or if there is an expectation that you will.

If you do not expect to spend more than 40% of your time on site within a 24 month period at any time then you can carry on claiming.

[BorisBollokov]

Sorry - should have made that clear - 2 days per week max in the office from the start! When you factor in holidays and furloughs it's not that hard to had a bit of flexibility into it.

Here is a good use case for PSC contractors to consider:

I work from home for a client who is based in another EU country. I am approaching a 24 month period soon. At the start it was a 6 month contract, which then got renewed. The contract is Outside IR35, full review was done by QDOS. Substitution, Control and MMO clauses are all strong. Working practice reflect the contract clauses.

In the first month of starting work, I had to be onsite from 3 weeks, and then working from home, with occasional travel when required.

I work from home most of the time. I travel on site for 3-4 days in a calendar month. Most of the time its is 3 days in a week for any given month. Sometimes the gap between travel is 5 weeks sometimes 8 weeks.

6 month contract is around 120 working days. So for that contract I was onsite for a total of 35 days. This 29% of 120 days. The next 6 month contract it was even lower, around 15 days.

As noted below, the law states "in the course of a period" and "over the course of a period", it does not define the boundaries of the period. I would be responsable to assume that the boundaries of the "period", initially will a 6 moths. Then the contract is renewed 3 more times, the period window groups to 24 months. and then renewed by another 6 months, no it is 30 months.

Interpretation of the law is always a pain in the ....


I am pretty certain the 24 month rule does not apply to me. If HMRC inspector investigates my PSC and challenges me, I am happy to go to Tribunal.

Under Section 339 of the Income Tax Earning and Pensions Act 2003 (ITFEPA), there is no mention of the 40% and whether this is applied on weekly basis, monthly or yearly. HMRC is an enforcement agency like Police, just for tax.

HMRC uses this act as the basis to develop their EIM guidelines notes, in this case the EIM32086, EIM32080, EIM32075.

In fact paragraph 3 of EIM32080 states:

"The test is whether the employee has spent, or is likely to spend, 40% or more of his or her working time at that particular workplace over a period that lasts, or is likely to last, more than 24 months"

In clause 5 and 6 of the ITFEPA section 339, it states the flowing:

(5) A place is not regarded as a temporary workplace if the employee’s attendance is—

(a)in the course of a period of continuous work at that place—

[INDENT]

(i)lasting more than 24 months, or

(ii)comprising all or almost all of the period for which the employee is likely to hold the employment, or

(b)at a time when it is reasonable to assume that it will be in the course of such a period.

(6) For the purposes of subsection (5), a period is a period of continuous work at a place if over the period the duties of the employment are performed to a significant extent at the place.

[BoredBloke]

Sorry - should have made that clear - 2 days per week max in the office from the start! When you factor in holidays and furloughs it's not that hard to had a bit of flexibility into it.

[TheCyclingProgrammer]

doesn't the 24 month rule only count if you spend over 40% of your time in one location. Try to WFH 3 days a week.

Yes but as NCOTAB says this is based over a rolling 24 month period. If you're 1-2 days on-site a week max from the outset you don't really have to worry about it.

[WTFH]

Agree your contract to be home based, and get the client to pay all travel.

[NCOTBAC]

are there many contractors hitting the 24 month rule though?

Erm yes there are, and counting the number that hit it historically. It will be 10s of thousands of people. The number of posts we get in here about it proves it.

I think the reason it's never been explored much is few real contractors get close to it

.

What????!! The accountants would explore it not the contractors so irrelevant if they are real or not, and refer to the previous answer.

[NCOTBAC]

doesn't the 24 month rule only count if you spend over 40% of your time in one location. Try to WFH 3 days a week.

Over a rolling period so won't work just to switch at 2 years.

[BoredBloke]

doesn't the 24 month rule only count if you spend over 40% of your time in one location. Try to WFH 3 days a week.

[Lance]

If it were worth it we'd all be doing it surely?

are there many contractors hitting the 24 month rule though?
I think the reason it's never been explored much is few real contractors get close to it.

If I'm still working for a client after 12 months it's beacuse I'm working from home a lot anyway, so the 24 month rule wouldn't count.
And I didn't stay in many perm jobs for 2 years, so I'm not about to change that

[NCOTBAC]

If it were worth it we'd all be doing it surely?

[TheCyclingProgrammer]

It does reinforce the old 'ask your accountant' as you can save 19% CT, but pay income tax on the benefit.
The alternative is to pay dividend tax on the money you pay yourself to cover the expense.
Or do you pay a lower salary to factor in the BIK so that you still don't get into NICs..... thinking out loud, do you pay NICs on BIK anyway????

Would depend on whether or not the BIK is liable to class 1 NIC (paid by the employee) or class 1A NIC (paid by the employer). Pretty much any benefit in kind provided by an employer to an employee is an allowable deduction for corporation tax purposes just like any other form of employee remuneration. I can't imagine it's ever worth it though if you have to pay either class 1A NIC on the benefit or tax + class 1 NIC if it's taxed as if it were earnings.

[Lance]

No, CT relief will still be available, but the expenses will need to be taxed as a BIK on OP personally.

that's interesting.

It does reinforce the old 'ask your accountant' as you can save 19% CT, but pay income tax on the benefit.
The alternative is to pay dividend tax on the money you pay yourself to cover the expense.
Or do you pay a lower salary to factor in the BIK so that you still don't get into NICs..... thinking out loud, do you pay NICs on BIK anyway????

Too complex.......

EDIT: not that I care as it sounds like disguised permie problem.

[TheCyclingProgrammer]

I do believe, and am happy to be corrected, that VAT isn't the issue, it's CT. You could still put them through your LtdCo but they just won't take anything off your CT bill.

No, CT relief will still be available, but the expenses will need to be taxed as a BIK on OP personally.

[Old Greg]