Reply to: Two year expenses rule

[TheFaQQer]

Despite what some will tell you (I see some already have) you can close your company and start a new one then claim mileage again. My accountant also suggested I do this but I closing the ltd co doesnt appeal to me.

A colleague of mine's accountant (different accountants to mine) has also told him he can claim beyond 2 years and he's waiting clarification on this.

Your accountant (and his) is either a crook or an idiot.

It's personal based on location, nothing to do with who you work for or who the client is.

I'd be changing accountants pronto if this is the quality of advice you are getting.

[Beefy198]

As YOU are claiming for the expense I would have thought that in the light of an investigation it would be blindingly obvious that that's what you have done - once they look at what you did in your previous 'work' they would spot it a mile off, surely?

(Especially when they talk to a random at client co who says "Tony? Oh yeah, he's worked here for five years")

[TykeMerc]

OK, not strictly right, but you can always get your contract after two years with a different location on it (another client site in a different town/city). Then just claim expenses to/from that site instead (will work if you are working for a large company and you get the agent to agree)

I really don't see how the HMRC will trace you if you close down companies, start another one and carry on claiming, or even if you go umbrella instead. They are pretty crap at doing anything, so you are pretty safe IMO

Until they catch up with you and do you for knowingly evading tax through bent expenses claims which is a criminal case.

HMRC aren't exactly totally on the ball, but they can spot stuff like expenses patterns and if they have any urge to do an investigation even a routine one it will show up very clearly. Tax Inspectors are generally speaking of at least average intelligence.

[oldtimer45]

OK, not strictly right, but you can always get your contract after two years with a different location on it (another client site in a different town/city). Then just claim expenses to/from that site instead (will work if you are working for a large company and you get the agent to agree)

I really don't see how the HMRC will trace you if you close down companies, start another one and carry on claiming, or even if you go umbrella instead. They are pretty crap at doing anything, so you are pretty safe IMO

[The Lone Gunman]

Thanks for all the feedback. Some really helpful info there.

As one person mentioned, not sure how I am in the wrong as I've not signed a contract extension yet. Am merely weighing up all my options.

The rules are that you have to stop claiming expenses at the point you know you will be over 2 years. If you r current contract is to less than 2 years you are OK, but as soon as you accept an extension you know you are going over so must stop immediately.

The advice that you can change companies is not correct as far as I am aware. AIUI if you took a new job with a new firm then the location of that job is your normal place of work and therefore the choice to commute is yours.

[NotAllThere]

Seems to go against the regs, which are clearly site based, not employer/client based.

The location bit was specifically put in so that an employee of a bank in the square mile couldn't go and work for another bank in the square mile, and claim it was a new temporary employment.

So closing a company down, and working through a new one, and not paying tax as a BIK on expenses, after two years, is tax evasion.

[PaulF]

Thanks for all the feedback. Some really helpful info there.

As one person mentioned, not sure how I am in the wrong as I've not signed a contract extension yet. Am merely weighing up all my options.

[THEPUMA]

Despite what some will tell you (I see some already have) you can close your company and start a new one then claim mileage again. My accountant also suggested I do this but I closing the ltd co doesnt appeal to me.

A colleague of mine's accountant (different accountants to mine) has also told him he can claim beyond 2 years and he's waiting clarification on this.

Dont forget, you can also claim part of the VAT element of your fuel even if you are claiming mileage and even AFTER 2 years. You do have to be VAT registered and not on the VAT flat rate scheme though.

Both accountants are wrong. Your employer is irrelevant in this equation. Closing companies therefore makes no difference. The only way you can continue to claim tax relief on travel expenses beyond two years is if the time you spend at the site reduces below 40% and even then it would depend upon the circumstances.

[TheBigYinJames]

Despite what some will tell you (I see some already have) you can close your company and start a new one then claim mileage again. My accountant also suggested I do this but I closing the ltd co doesnt appeal to me.

A colleague of mine's accountant (different accountants to mine) has also told him he can claim beyond 2 years and he's waiting clarification on this.

Seems to go against the regs, which are clearly site based, not employer/client based.

[BolshieBastard]

I've been told I could liquidate my current limited company and create a new one, although I'd rather not go down that road if I can help it.

Despite what some will tell you (I see some already have) you can close your company and start a new one then claim mileage again. My accountant also suggested I do this but I closing the ltd co doesnt appeal to me.

A colleague of mine's accountant (different accountants to mine) has also told him he can claim beyond 2 years and he's waiting clarification on this.

Dont forget, you can also claim part of the VAT element of your fuel even if you are claiming mileage and even AFTER 2 years. You do have to be VAT registered and not on the VAT flat rate scheme though.

[NotAllThere]

It's an improvement of what was in place before, where, except for some inspectors, you couldn't claim home to office mileage at all.

[The Lone Gunman]

Hi guys.

I'm coming up to my two years working on a contract and am looking to continue on it for at least another year.

Are there any ways to avoid the two year expenses rule as I'd be losing quite a chunk if I were to no longer claim expenses.

I've been told I could liquidate my current limited company and create a new one, although I'd rather not go down that road if I can help it.

Are there any other ways to get around it that you know of?

Thanks.

Paul

As others have said, changing companies does not work.
You take the hit, up your rate to cover or move on.

The thinking behind the 2 year rule is very simple: HMRC believes that any employee should either have moved closer to work or found another job within commuting distance inside 2 years. Outside the 2 years it is your choice to commute and therefore you are not entitled to expenses.

I know there are lots of valid arguments against this, but thems the rules.

[Spacecadet]

you're not breaking the law already, as you're only looking to extend, you haven't confirmed the extension yet.

The only way I can see for you to stop loosing out will be to negotiate plenty of home working. This will need to be at least 60%... i.e. at least 3 out of 5 days out of the office... after 2 years you could well be in a position to negotiate blaming pressures at home.
Alternatively, if they have offices in many locations with the project team spread around then switch to a different office.

You don't say if you're staying over night or commuting on a daily basis. If you're commuting then its probably easiest taking the hit

[pmeswani]

Surely business expense limits are per person, not per company?

I wasn't suggesting it from that angle. :-)

[thunderlizard]

Surely business expense limits are per person, not per company?

That is correct. You could set up a complex chain of intermediary companies to work through, but as long as it's still PaulF going to site X for more than 2 years, any travel benefit you get is taxable.