Reply to: expenses - the 24 month rule, a different question

[LisaContractorUmbrella]

Whilst I would agree that a lot of HMR&C's rules and regs are about as clear as mud the 24 month rule is pretty straight forward and the penalties for not playing by the rules are pretty harsh. Also, as Mal says, the responsibility to understand legislation falls on your shoulders - 'I didn't know' will never be accepted as a defence by HMR&C I'm afraid



Admin note: further general reading here: 24 month rule

[Wanderer]

Basically, HMRC claim that a period of continuous work can be continuous even if it's not continuous?

escapeUK is exactly right. How are we supposed to interpret that sort of tulipe. Last one out, please turn out the light.

[escapeUK]

Read section 3.16

"A period of continuous work can remain continuous even where there is a break in attendance."

Isnt this just a perfect example of how the HMRC rules are nonsense. No wonder they cant enforce IR35.

The more I read about their workings the more I think I should join PCG to protect against them investigating my companies interpretation of their made up nonsense.

[Dark Black]

Thanks for all the discussion guys

For the record, if my accountant had said definitely one way or the other then I wouldn't be querying his advice, it's purely that it seemed a tad grey that I posted about it here.

Looking at it from Mal's POV - i.e working backwards, actually "seems" to make it more likely that it's ok to claim:

Last year I had approx 10 months out and the previous year had several months away from that client, hence in total, over the last two years I'd only worked with that client for a total of 9 months. Hence, by Hector's own rules I've spent less than 40% of the the last 24 months at the client.

Looking at the linked HMRC pdf file sections 3.12 onwards seem to back this up, particularly 3.19 (the Ferdinand example)

[malvolio]

If you make a mistake, or receive bad advice, you are liable for the corrected tax and interest. If you deliberately ignore a rule, they may impose penalties. Thats the same for any self-assessed tax declaration.

I know of people who have had expenses disallowed for tax relief. Most sucessfully defended their position but one guy got stung for a couple of grand (then again, he didn't listen to what he was told).

And I would argue that, for once, these rules are actually pretty clear. As soon as you know you will be there for more than 24 months starting today and counting back, and have spent more than 40% of your time at the client's site, expenses stop.

[Wanderer]

Like so many things it seems to be a grey area. So what happens if you decide that the 24 month rule doesn't apply and claim expenses?

If you get investigated, will you be fined/penalised or will you just have to pay back the tax without penalty?

What if you show them that you weren't blatently taking the piss but gave careful consideration and decided in good faith that the 24 month rule didn't apply to your situation and it's not our fault if the rules are as clear as mud.

Any accountants seen this situation? What happens?

[centurian]

Also notice the Earnest example which said basically said because he was being crafty, then he couldn't claim - even though he was within 24 months every time.

Am I correct in thinking that the 24 month "rule" is really just a "guideline" for the overarching issue of allowable travelling expenses...

Much like the 90-day "rule" for expats, where some chap got nailed for millions as HMRC argued that he was still resident in the UK even though he had fully complied with the 90 day "rule" for the past 20 years.

[centurian]

I'm not sure I agree. See 3.12 of http://www.hmrc.gov.uk/helpsheets/490-chapter3.pdf. The word continuous is used repeatedly. I don't think any sensible interpretation of the word continuous would cover your circumstances.

As an accountant defending such a case against HMRC, I would be gutted if I lost.

Read section 3.16

"A period of continuous work can remain continuous even where there is a break in attendance."

In particular notice the last example (Etaoin). Not quite the same as our example as it refers to knowing about the break at the outset, but I think the word "continous" in the HMRC dictionary has a different meaning.

Glad you're not my accountant

[THEPUMA]

I'm not sure I agree. See 3.12 of http://www.hmrc.gov.uk/helpsheets/490-chapter3.pdf. The word continuous is used repeatedly. I don't think any sensible interpretation of the word continuous would cover your circumstances.

As an accountant defending such a case against HMRC, I would be gutted if I lost.

PUMA

[Clare@InTouch]

But I thought the 24 month rule was there with the assumption that if you were going to work in an area for this length of time it is not unreasonable for someone to move there. It has nothing to do with contracts or the actual client. It is geographic in nature arguing contracts won't matter. If you work in that area for so long most people would move there so they can stop you claiming expenses.

Sorry - half answering and not entirely the question that was asked.

The 24 month rule does go on location. In this case I'm taking it that the 10 month gap was spent totally elsewhere...? As Lisa says you need to work out how your time was split in the 24 months you were there, and how much therefore falls into the 24 month window that you're now in - you can then figure out if you're under or over the 40%.

[LisaContractorUmbrella]

The 40% rule applies to the 24 months preceeding the start of the new contract. If your new contract started 1/4/2010 you will need to work out how many months were spent at the client site between this date and 31/3/2008; if it is more than 40% of the time then the 24 month rule would apply

[Moscow Mule]

What were you doing in the 10 months you weren't there?

[northernladuk]

In my view it would be hard to argue any relationship between the two contracts unless there was an expectation at the time you left that the second contract would be offered, or the work is a direct continuation of where you left off 10 months ago.

But I thought the 24 month rule was there with the assumption that if you were going to work in an area for this length of time it is not unreasonable for someone to move there. It has nothing to do with contracts or the actual client. It is geographic in nature arguing contracts won't matter. If you work in that area for so long most people would move there so they can stop you claiming expenses.

[Clare@InTouch]

In my view it would be hard to argue any relationship between the two contracts unless there was an expectation at the time you left that the second contract would be offered, or the work is a direct continuation of where you left off 10 months ago.

[northernladuk]

My view is is that they don't think that I'd have a very strong case if HMRC looked into it.

That's because someone who does this for a living has advised it and I don't know much better.

Rules maybe rules with the HMRC but they are there for a reason to make sure people don't try and abuse the system. Although it may say 10 months that is a rule of thumb as to what is reasonable. 9.6 is pushing it very hard. You can argue it is under 10 minths but you can't really well argue you are not doing what they are trying to clamp down on.

Your call I think this one. How much is worth a good nights sleep at night?