Reply to: IR35 and working at one location

[Taxman]

24 month rule for travel and subsistence

As an accountant specialising in Contractors, I am regularly asked questions about the 24 month rule and the lack of Inland Revenue guidance never ceases to annoy me. Too much is down to an individual's interpretation.

Many of my clients are in the City of London and I am often asked what length of time they need to be away from that area, after finishing one contract, for them to return to the same area under a new contract and be eligible again for their travel costs etc (ie for the 24-month period to be rest).

I received a superb answer from the Inland Revenue today...

I stated the facts as above and further explained that the client will not renew his existing contract because he would immediately breach the 24-month rule. I also explained that he was likely to return to the Square Mile in the future but not necessarily with the same end-client.

Their answer? As long as it is a separate contract, the clock is reset regardless of the length of the break OR the location of the new contract. I was even informed specifically that the client could move to the end-client immediately next door and that would be allowable.

Absolute nonsense as many of you will instantly have recognised!

The question was explicitly answered in relation to the Square Mile and everyone knows the Square Mile is treated as a single site. The Inland Revenue themselves gave that guidance in the 490 publication.

What chance has the layman got when the Inland Revenue doesn't even know it's own rules?

Other subscribers opinions on these questions would be appreciated:

1) What is a suitable period for a break between contracts in the same area for the 2 contracts to be treated distinctly for the 24-month rule?

2) Square Mile aside, what is a suitable distance between sites for 2 workplaces to be treated entirely distinctly and not as one site?

3) Is it ever possible to call the Revenue and get the right answer?

Sorry, that last question was stupid. Not to mention that it's not just the Revenue any more, it's Revenue and Customs, so now there is even more for them to get wrong and with many less staff to do it...

[Bradley]

Re:Expenses

Hi

I'm new to this forum and would appreciate some help please. Decided to become a contractor after being made redundant 2 years ago.

I got a 3-month contract in Feb 04 via an agency (which has been extended 6 times and I expect to be extended on several more occasions) and am using an Umbrella company, so as I understand it, IR35 doesn't come into it and "I am a PAYE employee with the benefits of being able to reduce tax" as they explained it to me.

Although the contract says "client location:xxxxxx", I very rarely work at that particular office (it is an admin office and is where the people who run the project are based - I may work there once every 2 weeks)

I deliver training courses for this client (one of the UK's police forces) - they have 8 training locations all within about 10 miles of each other and can be at any one of these locations.

I currently claim daily travel expenses but on my expense form I put "home to XXXX" where XXXX is the name of the city, rather than a specific location within the city - I live 40 miles from the city. I also and meal allowance

My question is what would be my position after 2 years in relation to claiming mileage and meal allowance against tax.

Thanks

Mike

I don't think you can claim anything now as your employment has all been at the one location. The two year thing really doesn't matter.

[copper]

Hi

I'm new to this forum and would appreciate some help please. Decided to become a contractor after being made redundant 2 years ago.

I got a 3-month contract in Feb 04 via an agency (which has been extended 6 times and I expect to be extended on several more occasions) and am using an Umbrella company, so as I understand it, IR35 doesn't come into it and "I am a PAYE employee with the benefits of being able to reduce tax" as they explained it to me.

Although the contract says "client location:xxxxxx", I very rarely work at that particular office (it is an admin office and is where the people who run the project are based - I may work there once every 2 weeks)

I deliver training courses for this client (one of the UK's police forces) - they have 8 training locations all within about 10 miles of each other and can be at any one of these locations.

I currently claim daily travel expenses but on my expense form I put "home to XXXX" where XXXX is the name of the city, rather than a specific location within the city - I live 40 miles from the city. I also and meal allowance

My question is what would be my position after 2 years in relation to claiming mileage and meal allowance against tax.

Thanks

Mike

[Lucifer Box]

Crickey, that must be a first!

[Lucifer Box]

I seem to recall also that it's geographical location rather than address. So you could do, say, 18 months at one city location and then if offered a 12 monther at a different city location and company around the corner, you could not claim for travel expenses at it is the same "rough location". Of course, HMCR probably aren't too sharp at checking that sort of thing anyway, so in reality it's probably not much of an issue.

[malvolio]

OK, I'll try again, once

You can claim mileage anyway, the question is whether or not you have to pay tax on the money you get as a result.

Hector will allow 24 months of travel expenses from place of work (for a contractor, assume this to be your normal residential address) to temporary place of work (for a contractor, the place where his client is) or to a temporary accomodation (if that is more convenient). After 24 months, you can still claim it, but it will be a Benefit in Kind and thus subject to taxation as income and will need to be declared on your SA form.

If you are dumb enough to take on a 25 month contract, then clearly the 24 month dispensation won't apply, for reasons that should be obvious (and that have already been stated).

Therefore, it is blindingly clear that you should aim for a 24 month contract (or a series of shorter ones that add up to 24 months) so that you can legitimately claim the travel tax free for the first 2 years. After that, it's going to be taxed anyway.

It's really not that difficult, is it?

[Robot]

I am not sure what is wrong with the scenario and answer given.

Please explain Malvolio, or at least let S2Budd know what he claim for.

[malvolio]

At least read the rules before you comment on them. The journey is between your normal place of work - i.e. your registered office - and your temporary location. Unless you've listed the rented flat as your company address of course...

Alternatively, if you're under an umbrella and don't have your own company, your "normal place of work" is either their registered office, since that's in effect who you're "employed" by, or your own home in the absence of any other suitable location. And the travel is worked from your home address to your temporary office, less the distance to the employer's office (assuming it's roughly en route), if you want to adhere strictly to the rules regarding BIK

And the 24 month dispensation ceases once it is known to you that your stay is going over that threshold. If you can't manage to arrange renewals to accommodate that boundary, then you're probably in the wrong line of work.

[Robot]

What happens if you live away from home at the same location but have a number of clients within each two year period.
Is this OK in terms of claiming travel expenses for over the two year period?

Scenario?

You have temporary accommodation in London, ‘near the place of work’ for 15 months, you stay in the same flat but work at a different location for 7 months, you still stay in the same flat but find work at another location for six months.

I would say

The last six months would not be allowable as ‘you know and are at the same geographical (temporary workplace) location for greater than 24 months’. Inland Revenue would review workplaces, and the address you stayed at, if they ever came sniffing of course!

[malvolio]

OK, understood. And to be clear about it, I would also suggest a newbie using an umbrella while he gets his feet wet on contract #1 - but I would hope they would have the nous to investigate all the options for contract #2!

[s2budd]

IR35 and working at one location

What happens if you live away from home at the same location but have a number of clients within each two year period.
Is this OK in terms of claiming travel expenses for over the two year period?

[Robot]

[QUOTE=malvolio]What's this "employment" thing then? I'm employed full time by MyCo, nobody else...

Correct, forget the word Employment. If you are a 'newbie' with an umbrella company / your own limited company then you may have one employment! I.e. Three month stint with the end user and then bugger off back home, the place of work is not then a temporary place of work but a permanent place of work. Travel and Subsistence is not allowable.

Obviously the idea is when you start with the Ltd Co/Umbrella Co it is your EXPECTATION to work elsewhere, but if you don’t and you leave the umbrella company / close your limited company after the initial three months. The Inland Revenue will see this as permanent place of work. See tax bulletin 76.


That's news to me as well. I've had more than a few 3-month gigs (some concurrently) and I would no more use an umbrella than I'd buy lunch for Gay Gordon.

I do apologise, I meant a ‘newbie’ starting off and has an offer of a three month contract or less than.

[malvolio]

b) W(h)ere an individual may expect, when they take up the employment with a company that this will be their only employment.

What's this "employment" thing then? I'm employed full time by MyCo, nobody else...

The majority of contractors on this board say ‘if you have a three month contract or less go with an umbrella company’

That's news to me as well. I've had more than a few 3-month gigs (some concurrently) and I would no more use an umbrella than I'd buy lunch for Gay Gordon.

Anyway, going back the original question, you are actually quite correct that the 24-month rule applies as you say if you know the duration will exceed 24 months. It should not be outside the wit of most of us to try and ensure that doesn't happen, of course, so you get the benefit for the first 24 months, if not thereafter.

[Robot]

But do you think what I'm saying about travel expenses and IR35 is right?

No -

Travel and Subsistence should not be claimed were

a) You know you are going to be at the same workplace / geographically location for more than two years.

b) Were an individual may expect, when they take up the employment with a company that this will be their only employment.

The majority of contractors on this board say ‘if you have a three month contract or less go with an umbrella company’ I think umbrella companies need to review this with regard to point B.

Also the expected to be over 2 years thing. NOT that I would wish to encourage tax fiddling, god forbid! the very idea! however, will the IR notice that the address is the same?

They will on an Employer compliance review, it is their job afterall!

[xoggoth]

Agree. Malvolio/Tim are correct.

Also the expected to be over 2 years thing. NOT that I would wish to encourage tax fiddling, god forbid! the very idea! however, will the IR notice that the address is the same?