It’s essential to ensure your workplace is deemed temporary when determining whether you have the right to claim travel and subsistence expenses. If you’re a contractor, assessing your workplace status is extremely important.
There are a number of rules set by HMRC which will determine whether you’ve the right to claim travel and subsistence expenses whilst you work. The rules focus on whether your place of work can be classified as temporary or permanent.
Essentially, if your workplace is classified as being temporary, you’ve 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.
Have you been issued an overarching employment contract?
Having an overarching employment contract means you anticipate working on multiple assignments when working via an umbrella company. With this type of contract, each place of work will be classified as temporary, which then permits you to claim travel and subsistence expenses as you work.
The importance of working on more than one assignment with your umbrella…
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 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.
Complying with the 24 month rule
As soon as you anticipate working at one place of work for more than 24 months, your right to travel and subsistence will end as your workplace will be deemed as permanent from that point onwards.
For example, you’ve been working at Workplace A for 18 months and your contract is renewed for a further seven months. From that point, you’ll no longer be eligible to claim travel and subsistence.
Resetting the 24 month rule
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 ‘new’. These requirements are:
- It must be at least 10 miles from the previous workplace
- The journey you take must be substantially different.
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’ve been working at Workplace A for 18 months. You now obtain a new assignment 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. Your new workplace is now classed as temporary, and the 24 month rule is reset.
Running over the 24 month rule
If you’ve 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:
- Ensure you’ve been issued with an overarching contract
- You should anticipate working in more than just one assignment with your umbrella company
- Ensure you comply with the 24 month rule.