Reply to: 2 year rule

[sage@reillymcmordie]

2 year rule

Your position has been explained perfectly by Bob Jones in his post on 21/3.
I'd recommend you take your counsel from there even if it is not what you want to hear.

[Bob Jones]

Any accountant wishing to argue the case for another 24 months also needs to take into account Patten J in the case Kirkwood v Evans viz:

"Having regard to the provisions of paragraph 5 the definition of a temporary workplace is intended to encompass places of work which require the employee's attendance for a limited or temporary purpose within a course of employment (whether of limited duration or otherwise)."

The above quote refers to the original legislation - Schedule 12 FA 1998.

IF the attendance at the workplace comprises the whole of the period of the employment, or almost all of the period, or is likely to or it is reasonable to assume that it will then the workplace is permanent and the claim will fail.

Say a person takes on a contract which is expected to last 5 years - as this is over 24 months then the workplace is treated as permanent from day one. If 23 months into the contract a new company is formed with the intention of trading for 24 months the 23 months spent working for the first company will still fail as for that 23 month period the whole of the time was at the one workplace and it was known from the outset that this would be the case. The time spent with the new company will fail as it is expected from the outset that the one workplace will be attended throughout the whole of the period of the employment.

If this scenario were taken to appeal HMRC are bound to ask why one company was dissolved and a new company formed - and, of course, the reason is to avoid the restriction of the 24 month rule ..

To my knowledge this has not been tested and in my opinion likelihood of success is slim and I base this on attendance, well into double figures, representing HMRC at contentious Commissioners meetings on the new travel rules.

Bob

[blacjac]

Believe me, a number of accountants believe they can successfully argue where you start a new co, you can claim travel expenses for up to another 24 months.

Don't doubt that, but it doesn't mean they actually can does it? Who will pay the bill if the accountat is wrong?

[BolshieBastard]

Plus interest at 8%, and then doubled just to top it off.

By the time they 'catch' you, that usually means 2.5/3.0 times the original amount

Oh dear! Some of you people are really, really scared of HMRC aren't you? I bet 98% of you even answered the service company question on your returns too!

Believe me, a number of accountants believe they can successfully argue where you start a new co, you can claim travel expenses for up to another 24 months.

[munglefish]

Never considered the 40% aspect before - and it's killing my few remaining brain cells to factor that in...

I started for a company in May 2007 and stayed 11 months, the last 6 was working from home, so claiming the 152 mile round trip for the first 5 months. I left for another contract for 6 months, and then went back to the first company last September. The last extension will take me to June which under my understanding meant I could no longer claim the milage...but I dont think I'm over 40% at all so should be safe to carry on claiming...very confusing!

[centurian]

Because you intend to work there for more than 24 months you cannot claim travel expenses because it is would not be seen as a temporary place of work. If you were to claim travel expenses for more than the 24months and the HMRC found out they could demand payment for all the tax and NI on those expenses for the whole length of the assignment.

Plus interest at 8%, and then doubled just to top it off.

By the time they 'catch' you, that usually means 2.5/3.0 times the original amount

[Katie]

Because you intend to work there for more than 24 months you cannot claim travel expenses because it is would not be seen as a temporary place of work. If you were to claim travel expenses for more than the 24months and the HMRC found out they could demand payment for all the tax and NI on those expenses for the whole length of the assignment.

[Bob Jones]

The legislation is concerned with necessary attendance at workplaces and I can state categorically that it was not the intention of those who wrote the law for it to be circumvented simply by closing one company and opening another. The purpose of the legislation is to grant an allowance to those employees who, within their employment, move from site to site – certain caveats apply – one of which is that you a cannot have an allowance if you spend or are going to spend more than 24 months at a site – viz:
“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—
(i) lasting more than 24 months, or ….”
Those who take the view that you can have another 24 months on the change of an employment are probably basing their view on the legal definition of a period of continuous work - viz
S339 (6) ITEPA 2003 “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.”
Note – “…over the period the duties of the employment ….”. Does that mean that in the case of period of attendance where there are multiple employers each employment is looked at separately?
S336 ITEPA 2003 is the general expense rule and it states:
“..the employee is obliged to incur and pay it as holder of the employment…”.,
Note the legislation is in the singular but the Courts have decided that it is each and every holder not the particular individual so it could then be argued that “..the employment..” in S339(6) is all employments and that you do not look at each employment separately.
However, what you also have to bear in mind is this:
If a person is working on a project that is likely to last 5 years it will fail the 24 month rule from day one. If we follow the argument that you can change the company before the 24 months is up then the whole of the period will be at the one workplace and the claim will then fail by virtue of S339(5)(a)(ii) ITEPA 2003.
Bob.
www.internet-taxation.co.uk

[BolshieBastard]

Hi,

Quick question.

My next contract will take me over 2 years at my current site.

However, I changed LTD companies 6 months ago. In this instance, did the 2 year rule start over from when I started with the new company?

Thanks

Yes, claim travel expenses again for another 2 years.

You'll get alsorts of people saying 'no you cant do this' but HMRC have to investigate you first to find this situation.

I also know a number of accountants reckon they can successfully argue against HMRC's interpretation on the 2 year rule where you have set up a new company ergo you're a new employee \ resource working on a new contract.

Go right ahead is my thinking.

[LisaContractorUmbrella]

The 24 month rule applies to the location of your contract; you could actually end one contract and start another with a completely different company, agency etc but if your travelling time did not differ significantly and the span of the two contracts was 24 months + the rule would still apply.

[blacjac]

Or in other words.....



no.

[NotAllThere]

It is the location of you, the worker.

As has been discussed time and time and time again.

Not the company you work through. Not the company you work for. Not the agency you work through. It's where you are working.

[Mart001]

i believe the two year rule is to the individual and not the company.

[Rookie]

Probably a good place to start looking:

http://www.hmrc.gov.uk/employers/ebi...-travel-06.htm

[TheBigD]

AFAIK, you'll still be effected by the two year rule regardless of whether you changed to a ltd, from brolly to ltd etc etc...