What is the 24 month rule?The first thing a contractor must do is check whether they are eligible or not to claim the expenses. Daily travel to a client's site is considered legitimate business travel as long as the contractor satisfies the criteria laid down by HMRC.
Contractors can claim tax relief on their travel expenses up to the point when they know that their contract at the client's site is over 24 months. The period starts from the day that the contractor starts working at the new site.
Critical to retaining the ability to claim expenses and whether or not they are allowable is based on the contractor's knowledge concerning the contract length, and what subsequently evolves from the contract arrangements. Therefore it remains of paramount importance to understand the 24 month rule and when it may potentially impact on a contractor.
The nature of contracting also lends itself to more flexible working patterns. Operating across multiple client sites and locations does mean that a contractor may have several temporary workplaces and will need to take in to consideration the 40% rule.
Basically, if a contractor is spending 3 days at one client site and 2 days at another, they can continue to claim travel expenses up to the point they know that they will be spending 40% or more of their time at a particular client site. As soon as this is established, then the contractor cannot claim tax relief on travel expenses to and from that particular site although if they have individual trips to different locations they can still claim for these.
Contractors who break the rules and are found to have claimed and received travel expenses when they were not eligible will have to pay tax and national insurance contributions on the value of the expenses, and may also be liable to interest and penalty charges. ICS adheres to strict revenue compliance across all expense claims and only accepts claims that are legitimately supported by documentary proof. Our approach is based on protecting contractors from future tax liabilities and penalties.