Reply to: 2 Year Rule - Back To Original Location

[LisaContractorUmbrella]

I've read all the threads on this and loads of other advice and apologies if there is a clear answer already given - my question is:

working through my own umbrella company - just about to hit the 2 year mark - being retained by the company for another year - the position appears to be that travel expenses CANNOT be claimed AT ALL - is that correct or is it that you can claim the expenses but have to declare as income and therefore no tax relief available? This will make a very big difference to me but I'd be ok with it if I could claim the expenses but then had to pay tax - essentially the same as the company giving me a pay rise for the amount of the travel cost - but they won't do that but are happy to pay travel expenses.

If your contract has been extended and you are going to continue working with your umbrella company (please correct if I am wrong) then you will no longer be entitled to tax relief on your travel expenses. If the end client adjust your contract to reimburse your travel costs you will still have no entitlement to tax relief as you will have exceeded 24 months so the reimbursement would be treated as taxable income.

[Contreras]

I've read all the threads on this and loads of other advice and apologies if there is a clear answer already given - my question is:

working through my own umbrella company - just about to hit the 2 year mark - being retained by the company for another year - the position appears to be that travel expenses CANNOT be claimed AT ALL - is that correct or is it that you can claim the expenses but have to declare as income and therefore no tax relief available? This will make a very big difference to me but I'd be ok with it if I could claim the expenses but then had to pay tax - essentially the same as the company giving me a pay rise for the amount of the travel cost - but they won't do that but are happy to pay travel expenses.

You seem to be confusing what you can bill to the end client (via the Umbrella Co.) and what you can claim from your employer (the Umbrella).

The former is governed by the terms of the contract, the later is governed by [HMRC's interpretation of] the law.

[wubsa]

2 year rule and tax

I've read all the threads on this and loads of other advice and apologies if there is a clear answer already given - my question is:

working through my own umbrella company - just about to hit the 2 year mark - being retained by the company for another year - the position appears to be that travel expenses CANNOT be claimed AT ALL - is that correct or is it that you can claim the expenses but have to declare as income and therefore no tax relief available? This will make a very big difference to me but I'd be ok with it if I could claim the expenses but then had to pay tax - essentially the same as the company giving me a pay rise for the amount of the travel cost - but they won't do that but are happy to pay travel expenses.

[LisaContractorUmbrella]

Apparently from the thread I posted SJD say 14.4 months is needed between the end of one 24 month period and the next.

If accountants can't agree on this there is really little hope for the rest of us...

It is complicated but IMHO the guidance is perfectly clear in as much as a gap of 3 months when a contract that had already exceeded 24 months and then the location was revisited for a further period would not constitute a re-setting of the clock

[cojak]

Apparently from the thread I posted SJD say 14.4 months is needed between the end of one 24 month period and the next.

If accountants can't agree on this there is really little hope for the rest of us...

[LisaContractorUmbrella]

Interesting view. Assuming in this example the client and contracts are not the same and the locations are at opposite ends of the country, you would still track their previous locations and tot up how long they've been there over an average period to work out 40%?

From my point of view, if a freelancer ups and leaves for a new location (client or contract being irrelevant for the purpose of temporary or permanent workplace discussion) and considers the location they have just left as not one they anticipate going back to any time soon, but then another contract takes them back to the original location after a significant gap, I would say it resets.

It would be unrealistic to monitor a period of years tracking exactly which location has been visited and occupied, if it is reasonable to assume, as a contractor, that once one location is left for an independent contract elsewhere, that breaks those ties.

But with all due respect Craig this comes down to HMRC rules and not the opinions of individuals: From EIM32080 - 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. Where that is the case the workplace is not a temporary workplace and so it is a permanent workplace. Travel between that place and home will be ordinary commuting and so is not deductible.

[cojak]

We had exactly the disagreement and discussion here:

http://forums.contractoruk.com/accou...ml#post1696559

(so much so that I had to agree with the other poster and changed the title of the thread from 'facts' to 'advice'.)

[northernladuk]

You have to read between the lines and understand what HMRC are getting at here. It's ok to play the wording as you see it but it will be their call when you get investigated so have to be pragmatic. There are rules around duration and time back at the client so they are trying to achieve something here, do you really think 3-6 months is enough in their eyes? 3 is possibly the minimum in our line of work and they will know it, 6 months is again only 1 gig. Claiming expenses over a potential 48 months with a break of only 6 away? I don't think that is their aim so can expect problems if you go down that route.

[mudskipper]

The guidelines would suggest 40% of your time over 24 months, so a six month gap would not reset the clock.

As there seems to be disagreement, why not ring the HMRC helpline and ask? They should have the definitive answer.

[kaiser78]

If it was 2 weeks, I'd agree it's simply a continuation. My point of view is that a significant gap of 3 - 6 months (longer the better) is a good start. 2 weeks is simply a holiday break.

Trouble is that there is no proper test case so a lot of this is guidance and being prepared to stand by your views and interpretations. It's like the whole "if I move from a brolly to ltd but stay at the same location, is that a 24 month clock reset" discussion. On one side you have the law which states "employment" whilst on the other side you have HMRC's guidance and interpretation. There's 2 views and ways of reading it. (p.s. let's not open this can of worms!!)

This has turned into an interesting thread (and thanks to all) and yet am still a little confused. To clarify my situation further, the gap between moving from the original location to the current location has been approx. 6 months.

[moggy]

If it was 2 weeks, I'd agree it's simply a continuation. My point of view is that a significant gap of 3 - 6 months (longer the better) is a good start. 2 weeks is simply a holiday break.

Trouble is that there is no proper test case so a lot of this is guidance and being prepared to stand by your views and interpretations. It's like the whole "if I move from a brolly to ltd but stay at the same location, is that a 24 month clock reset" discussion. On one side you have the law which states "employment" whilst on the other side you have HMRC's guidance and interpretation. There's 2 views and ways of reading it. (p.s. let's not open this can of worms!!)

I would see that as a definite no - no questions asked, or people would just be moving brolly every two years.

[Craig@Clarity]

isn't this why the 40% was mentioned, that breaking ties is far too loose and could have people taking a two week break and coming back to the original contract?

If it was 2 weeks, I'd agree it's simply a continuation. My point of view is that a significant gap of 3 - 6 months (longer the better) is a good start. 2 weeks is simply a holiday break.

Trouble is that there is no proper test case so a lot of this is guidance and being prepared to stand by your views and interpretations. It's like the whole "if I move from a brolly to ltd but stay at the same location, is that a 24 month clock reset" discussion. On one side you have the law which states "employment" whilst on the other side you have HMRC's guidance and interpretation. There's 2 views and ways of reading it. (p.s. let's not open this can of worms!!)

[moggy]

Interesting view. Assuming in this example the client and contracts are not the same and the locations are at opposite ends of the country, you would still track their previous locations and tot up how long they've been there over an average period to work out 40%?

From my point of view, if a freelancer ups and leaves for a new location (client or contract being irrelevant for the purpose of temporary or permanent workplace discussion) and considers the location they have just left as not one they anticipate going back to any time soon, but then another contract takes them back to the original location after a significant gap, I would say it resets.

It would be unrealistic to monitor a period of years tracking exactly which location has been visited and occupied, if it is reasonable to assume, as a contractor, that once one location is left for an independent contract elsewhere, that breaks those ties.

isn't this why the 40% was mentioned, that breaking ties is far too loose and could have people taking a two week break and coming back to the original contract?

[Craig@Clarity]

But you considered a reasonable gap to be 3 to 6 months - if the OP worked 24 months in one location had a 3 month gap and went back to a 12 month contract in the original location the 24 month rule would not re-set

Interesting view. Assuming in this example the client and contracts are not the same and the locations are at opposite ends of the country, you would still track their previous locations and tot up how long they've been there over an average period to work out 40%?

From my point of view, if a freelancer ups and leaves for a new location (client or contract being irrelevant for the purpose of temporary or permanent workplace discussion) and considers the location they have just left as not one they anticipate going back to any time soon, but then another contract takes them back to the original location after a significant gap, I would say it resets.

It would be unrealistic to monitor a period of years tracking exactly which location has been visited and occupied, if it is reasonable to assume, as a contractor, that once one location is left for an independent contract elsewhere, that breaks those ties.

[Craig@Clarity]

Lisa, Does that mean that after a continuous 24 month period, you would have to work somewhere else for 15 months (60% of 24 ish) to bring you back down to an average of < 40% over a rolling 2 year period?

That would be silly wouldn't it? The main point of the thread is someone worked at location A for 24 months so was no longer temporary but permanent workplace.

The location was then a significant distance away at a new site (location B). Assumed that they worked there for a while and then went back to location A.

The question is is moving back to location A now a temporary workplace. My short answer to this was yes based on certain assumptions.

The 40% is if they had continued working at location A for over 24 months but their time there was always less than 40% it would remain a temporary workplace, even though the 24 months had been breached.