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24 Month Rule for Expenses

Are you aware of how the 24 month rule could affect your ability to claim expenses? Jump into our guide to find out.

If you are a contractor, you may be entitled to claim accommodation and travel expenses as long as your workplace is considered temporary. By HMRC’s standards, this is the knowledge that if your contract lasts longer than 24 months, you will be unable to claim further expenses.

What is the 24 month rule?

The legislation known as the 24 month rule was designed to provide tax relief on travel expenses for an employee or contractor whose role requires them to move between sites in the course of their employment. The 24 month rule is aimed at those who travel between their home and a temporary place of work, as opposed to standard commuting, and provides for the expenses incurred to be paid, free of tax, for those who meet the qualifying criteria.

According to HMRC, a workplace can only be considered temporary if you have worked there for less than 24 months. After this period, you can no longer reclaim expenses as you are considered a permanent employee of the company.

What is the 40% rule?

The 40% rule is linked to the 24 month rule. This states that if you spend over 40% of your time at a particular workplace, this will be considered permanent and you will be unable to claim travel expenses. This still applies if you have gaps in employment and return to the same place of work.

Breaks in attendance

For the purposes of the 24 month regulations, a break in attendance may not be enough to qualify for a separate period of work. This is because the rules work on the basis of a ‘rolling window’, meaning that any break will have to satisfy the 40% rule about working between different sites.

In order to class as a new place of work, there will need to be a break of at least 15 months (60 per cent of 24 months) between incidents of working on the same site, and a stint working at a different site in between.

If you leave and return to a place of employment within 24 months, your start date will still be classed as the first day in which your contract began.

Example: If you work on an assignment for a year, take a six-month gap to undertake another assignment and return to your first contract, this will still count as a period of 24 months and you would be unable to claim expenses.

Get Your Free Guide to Contractor Expenses

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How can Nixon Williams help?

The rules surrounding expenses can seem incredibly daunting and we know a lot of contractors worry about how they’re going to manage their finances while trying to run their businesses.

So, as specialist contractor accountants, we’ll ensure you save time, money and remain compliant with all the relevant legislation, by helping you with everything from expenses to planning your retirement.

Have a chat with the team today, on 01253 362062.

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