Reply to: Contract Re-Newal 24 Month Rule

[kaiser78]

Not sure what you are asking here but these rules apply to geographic areas, not per client. Oh no, it applies all the way though... which includes going back after a break. It is a rolling 40% over any given 2 year period. So if you worked at client site 2 days a week the 24 month rule would never kick in.

My situation is that I am not taking a break from client/location as going all the way through the 2 year period.

Interesting one - just spoken again to my accountant who advises that by not claiming expenses would more or less net out by the funds being retained in the company as profit, which I could draw down on anyway as dividend etc. He is going to look into this further.

[northernladuk]

40% rule applies to return back to client site doesn't it, as opposed to 40% on site all the way through ?

One complication arises when a contractor returns to a workplace they have previously attended. Such situations are governed by the so-called "40% rule".

If you look back over the previous 24 months, and you spent 40% or more time at your current workplace, you cannot claim travel expenses.

For more details, and examples of how the rules are applied by HMRC, consult EDM32080.

Understandably, the calculation of this percentage can be a complicated process (and ever-changing), so you should always seek professional advice if you are unsure about what you can claim for.



May be our esteemed fellow posters can clarify.

Not sure what you are asking here but these rules apply to geographic areas, not per client. Oh no, it applies all the way though... which includes going back after a break. It is a rolling 40% over any given 2 year period. So if you worked at client site 2 days a week the 24 month rule would never kick in.

[kaiser78]

You say something about not having to be at cleint site very day - is there a chance you are inside the 40% rule?

40% rule applies to return back to client site doesn't it, as opposed to 40% on site all the way through ?

One complication arises when a contractor returns to a workplace they have previously attended. Such situations are governed by the so-called "40% rule".

If you look back over the previous 24 months, and you spent 40% or more time at your current workplace, you cannot claim travel expenses.

For more details, and examples of how the rules are applied by HMRC, consult EDM32080.

Understandably, the calculation of this percentage can be a complicated process (and ever-changing), so you should always seek professional advice if you are unsure about what you can claim for.



May be our esteemed fellow posters can clarify.

[v8gaz]

You say something about not having to be at cleint site very day - is there a chance you are inside the 40% rule?

[northernladuk]

A real business would say "From this date xx/xx/xxxx our prices rise by 5%."

Personally I would (and did) time my contracts to be just under 24 months. But this wasnt too difficult as I started 10 days into a year and my contract of 3 months was till end of 3rd month rather than 90 days.

+1 to both these. Bit of forward planning right at the beginning of the contract is the way to go, not trying to fudge it when it is too late.

[escapeUK]

Don't mention 24 month rule or reasons for rise IMO. Passing on your companys business to the client in unprofessional I think. Tell him about economic climate and all that but don't go in to details about legislation changes that are your companies issue and no one elses. Can I have some more money because I lose a tax break sounds v amateur.

A real business would say "From this date xx/xx/xxxx our prices rise by 5%."

Personally I would (and did) time my contracts to be just under 24 months. But this wasnt too difficult as I started 10 days into a year and my contract of 3 months was till end of 3rd month rather than 90 days.

[northernladuk]

But what if the contractor fudged the dates to stay within the 24 month rule and then actually did leave before the end of 24 months on site?

But he isn't. He is fudging his figures because the expected date of him leaving from his client is over the 24 months. I am being super pedantic I know but that is me in these cases. He knows he will be there over the 24 month so any amount of fudging paperwork or pretending he might not be is just bollox.

Perhaps a compromise would be to stop claiming for the expenses now and wait and see what happens. IF the contact is terminated without breaking the 24 month rule, the expenses can be claimed retrospectively.

Not seeing that as a compromise. Those are his normal options. He is over so he stops claiming unless he doesn't make it in which case he claims. I see what you are saying but that isn't a compromise.

Definitely worth a try. Put it to them that your expenses are going to increase due to you being on site for 24 months and you are going to have to increase your rate. Might be tough in the current economic climate but worth a shot. Alternatively, it might be time to look for something different or a bit closer to home unless the place you are working is a really good gig.

Don't mention 24 month rule or reasons for rise IMO. Passing on your companys business to the client in unprofessional I think. Tell him about economic climate and all that but don't go in to details about legislation changes that are your companies issue and no one elses. Can I have some more money because I lose a tax break sounds v amateur.

[Wanderer]

By fudging the dates you KNOW you are going to be there. Asking for a 4 month and knowing you will get a 2 monther after instead of 6 months means you KNOW you will be there.

But what if the contractor fudged the dates to stay within the 24 month rule and then actually did leave before the end of 24 months on site?

Perhaps a compromise would be to stop claiming for the expenses now and wait and see what happens. IF the contact is terminated without breaking the 24 month rule, the expenses can be claimed retrospectively.

An alternative is to ask for a rate rise to cover maybe not all, but some of the expense. Not sure though if clientco would go for this but may be worth a try ?

Definitely worth a try. Put it to them that your expenses are going to increase due to you being on site for 24 months and you are going to have to increase your rate. Might be tough in the current economic climate but worth a shot. Alternatively, it might be time to look for something different or a bit closer to home unless the place you are working is a really good gig.

[northernladuk]

Thanks - just to add I am claiming 300-400 miles per week, depending on what days I need to be at clientco, which over a month is a significant amount.

So what, you are over or you aren't. Don't let the amount of money sway your decision as to whether you commit evasion or not. Oddly enough the more it costs means you have more chance of fudging it when in fact you will be in more trouble... if that makes sense. If it was less you would do it properly but because it is quite a bit you are happy to fudge it? Hmmmmmm

[northernladuk]

7of9 asked this exact question here....

http://forums.contractoruk.com/accou...ract-date.html

By fudging the dates you KNOW you are going to be there. Asking for a 4 month and knowing you will get a 2 monther after instead of 6 months means you KNOW you will be there. Doesn't matter about the contracts. If you know you should stop. If you want to take risk on fudged contracts good luck to you but as already pointed out contracts with odd finishing dates that finish the month of the 24 month is more likely to get noticed than just claiming it regardless IMO. Screams a fudge and you can bet your bottom dollar they will go through everything else with the finest comb you can imagine as you have proven to them you are dishonest....

But.. others might say f' em you will never get investigated...

Up to you,,

[MyUserName]

Remember that hmrc are not limited to just reading contracts. They can challenge things in court in front of an impartial judge, if you were a judge and you saw this would you rule it was a deliberate attempt to avoid paying due costs?

[kingcook]

Take a 5 month extension.

Will the contract have any clauses along the line of, "any party is not obliged to give/accept any work after the end of this contract"?

[kaiser78]

From a purely business point of view with all the travelling, the contract may not be economically viable beyond 24 months so it might be reasonable for someone to work right up to the 24 month limit and then leave but you are treading a fine line here.

If you took (say) a 4 month extension and then move on then you're OK but if if you are just going to say sod it and take a further extension beyond 24 months then you are on very dangerous ground because it will look like an odd pattern of contract extensions and HMRC may smell a rat (probably not unreasonably too).

My previous extensions have all been 3 months except for the last which was 6 months, so as least have not been consistent if HMRC asked. And to stress I have not been told the extension period yet, so far as I am concerned may not make it past 24mnths anyhow.

An alternative is to ask for a rate rise to cover maybe not all, but some of the expense. Not sure though if clientco would go for this but may be worth a try ?

[Wanderer]

So I am thinking of contacting the agent and advising I only wish for an an extension of 4 months and x weeks only (taking me up to 2 years) before being offered another 6 months, and thefore by implication falling within the 24 month rule.

From a purely business point of view with all the travelling, the contract may not be economically viable beyond 24 months so it might be reasonable for someone to work right up to the 24 month limit and then leave but you are treading a fine line here.

If you took (say) a 4 month extension and then move on then you're OK but if if you are just going to say sod it and take a further extension beyond 24 months then you are on very dangerous ground because it will look like an odd pattern of contract extensions and HMRC may smell a rat (probably not unreasonably too).

[kingcook]

You expect a renewal beyond 24 months so even this renewal is pushing it a bit. My advice would be to stop claiming as (after tax) is it really worth that much money to you?

It's not just the tax saving though is it. You're having to shell out out of your own pocket.

So as well as not being able to get corp tax relief (as it's not a company expense) you would also need to pay yourself extra in salary/dividends to make up to the same amount as what you'd previously been paid by your ltdco.

(Only thought of this the other day, i'm ready to be proved wrong!)