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It is essential to ensure your workplace is deemed temporary when determining whether you have the right to claim travel and subsistence expenses. If you are a contractor, assessing your workplace status is extremely important.
There are a number of rules set by HMRC which will determine whether you have the right to claim travel and subsistence expenses whilst you work. The rules heavily focus on whether your place of work can be classified as temporary or permanent.
Essentially, if your workplace is classified as being temporary, you have the right to claim travel and subsistence (depending on other qualifying rules like the ’24 month rule’); however if HMRC believes your workplace to be permanent, your right to claim these expenses will end.
Having an overarching employment contract means you anticipate working on multiple assignments when working via an umbrella company. With this type of contract in place, each place of work will be classified as temporary, which then permits you to claim travel and subsistence expenses as you work.
There have been cases where some contractors jump from umbrella to umbrella, working on just one assignment per company; however this poses some issues. If you anticipate working on one assignment through your umbrella, your workplace will be automatically classified as permanent meaning your right to claim travel and subsistence expenses would end. With an overarching employment contract, you should anticipate working on multiple assignments with your umbrella company, allowing you to claim these expenses.
As soon as you anticipate working at one place of work for more than 24 months, your right to claim travel and subsistence will end as your workplace will be deemed as permanent from that point onward.
For example you have been working at Workplace A for 18 months and your contract is renewed for a further seven months. From that point, you will no longer be eligible to claim travel and subsistence.
To reset the 24 month rule, you must start working at a new workplace deemed as ‘new’. HMRC have set two requirements which need to be met when establishing your workplace as being ‘new’. These requirements are;
For example you work at Workplace A which is 18 miles away from your home. To get to work, you leave your home, turn right and travel up a straight road. You have been working at workplace A for 18 months. You now obtain a new assignment for 12 months at workplace B. This workplace is also 18 miles from your home; however, to get to it you leave home, turn left and travel up a straight road.
In this example the journey you take on the new assignment is more than 10 miles from your last workplace and the journey taken is substantially different, thus your new workplace is classed as temporary and the 24 month rule is reset.
If you have been working at one place of work for 24 months, you should cease claiming travel and subsistence expenses. Your umbrella company should have the necessary checks in place to monitor this. If you do continue to claim expenses, HMRC could claim back any tax liabilities that should have been paid for that period.
To ensure you remain eligible to claim travel and subsistence, please remember the following points;
You might avoid a fine if a close relative died shortly before the self assessment deadline, you've been seriously ill, or if you had major IT problems.