The 24 month rule for contractor expenses is a law that allows contractors to receive tax relief on travel expenses should you be required to travel from your home to a temporary working location for a period of 24 months (two years) or less.
If you qualify for such relief it will be paid to you, tax free, directly by your employer. Under the law, travel expenses refer to all reasonable costs that are incurred as a direct result of you having to travel from your home (permanent residence) to your temporary working location.
The Rule Defined
The 24 month rule for contractor travel expenses only applies towards the first 24 months of you being asked to work from a temporary working location if the contract is expected to last for no more than 24 months.
If the contract signals a permanent move, or the move is to last for more than 24 months, no relief will be available for any period. If, however, halfway through a shorter contract your temporary location becomes permanent, or the contract is extended so the total time at your temporary location will exceed 24 months, relief is no longer available from that point on, but relief claimed up until that point may be kept.
Similarly, if you’re asked to work full-time from a temporary location for longer than 24 months, but several (or many) months into your contract at this location your time there is shortened to less than 24 months, you’ll be able to claim relief on the remaining months you have at your temporary location, but you won’t receive relief for the months up to that point, as at that time your contract was intended to be longer than the two year threshold.
What is a Temporary Working Location?
A temporary working location, for the purpose of the 24 month rule, is any location that you aren’t expected to be at (and ultimately aren’t at) for longer than two years.
You should note, however, that if your temporary working location is close enough to your permanent work location that it doesn’t prompt a dramatic change in the journey you take or the cost incurred to get there, with your journey from home remaining largely the same, you won’t be able to claim relief, regardless of how short your temporary working contract is.
There are, of course, exceptions to the rule.
If you’re required to work one day a week from a temporary location for a period longer than 24 months you’ll still be able to claim relief for your weekly journeys to your temporary working location because you won’t be spending more than 40 percent of your working time in this temporary location (you’ll be spending just 20 percent, in this example).
If you’re in your job for less than two years, or you’re moved to a new permanent working location, you cannot claim relief as at every stage your working location is considered to be permanent.
How to Take Advantage of the 24 Month Rule for Contractor Expenses
Hiring an accountant to take care of (and organise) your contractor expenses is a necessary business investment if you wish to spend less time worrying about what you’re owed, and more time focusing on your work.
To speak with a professional accountant to discuss the the process of claiming for contractor expenses, or for any other questions, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.