24 Month Rule
24 Month Rule – Temporary Workplace
One attraction of working as a contractor is that you can claim for all sorts of business expenses denied to permanent PAYE workers and offset them against tax. However, HMRC are very strict on the definition of what is deemed to be a temporary workplace when it comes to claiming such expenses. Your workplace must be somewhere you attend for the purpose of performing a task for a limited duration, which does not exceed 24 months. If you enter into a contract for more than 24 months from the outset, under HMRC legislation you are not allowed to claim any expenses against that contract!
If you agree to perform full-time duties at a temporary workplace for, say, 15 months and after 12 months your contract is extended to 25 months, you are allowed to claim all expenses for the first 12 months but nothing after that!
If you continue to work on an assignment at the same location for longer than 24 months, and you spend less than 40% of your time carrying out your duties, then this is deemed to be a temporary workplace and you can continue to claim travel expenses from home to that place of work. If you spend more than 40% of your time at the same location, HMRC will view the workplace as permanent and you will not be permitted to claim any expenses against it.
Some umbrella companies will advise you that you can continue to claim expenses from the same assignment after 24 months if you leave your existing Umbrella Company and join them, but this is not true. HMRC’s 24 month rule applies to the site/location where you’ve been working and not the umbrella company you use, so beware!!