Help – I’ve been on the same contract for over 2 years. What are my options?

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Contractors working through their own limited company – referred to by HMRC as Personal Service Companies (PSCs) – are currently able to claim tax relief on travel and subsistence expenses.

This means in many cases they can legitimately offset costs incurred when travelling to and from client premises and can claim for temporary accommodation and food costs (subsistence).

All expenses must be wholly and exclusively business related and must be considered ‘reasonable’.

What’s the 24 month rule?

With travel expenses, they are only allowable for 24 months. The whole basis of the rule is to give Contractors some relief when working at a temporary workplace. Beyond 24 months, this workplace is no longer considered temporary but classed as permanent, unless less than 40% of the time is spent on that specific workplace.

Once it becomes clear that the engagement will exceed 24 months, the ability to claim for travel immediately ceases. In other words, you may not be able to claim for the whole two year period. If, for example, it’s a three year contract, you won’t be able to claim for travel at all therefore make sure you fully check the dates when you sign your contract extensions.

Can I just take a few months off?

This will not change anything unless less than 40% of the time within the 24 month period is spent in the specific workplace.

What if I change location?

For this to count the change must be ‘significant’ in cost and / or distance. Moving to another office in the same city would not count, but another office in a different town would.

What if I change roles?

This will not class as a new engagement, as the end client remains the same.

Discussion points:

  • Have you already been on your contract for over 24 months? Are you still claiming expenses?
  • If not, what are you planning to do after 24 months?
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