Contractors' Questions: Can I claim travel expenses from home in France to the UK?
Contractor's Question: I have been living in France for the last three years. I have a house with my family here, and my child attends a local school. I declare tax in France but have been doing all my work (as a permie) in the UK, so I have been paying tax and NI in the UK, with a nil tax bill from the local taxman each year. The tax position is clear in that the UK and French tax offices accept all work is being done for a UK client in the UK, meaning my sole tax liability is in the UK. Each year I receive a new E106 form, which takes care of health cover in France.
Now my position is changing. I am going to work for my current employer as a contractor. I accept I will fall within IR35. So I'm thinking of the limited company route, allowing me to claim expenses. I have an empty flat in the UK from which my tenant has moved out, allowing me to use this as my base when in the UK for work. I plan to travel back to the UK every week but will be seeing various clients based all over the UK. This means I will almost never be on the same client site two weeks in a row and never attend the office of my employer. I travel to the UK, stay over in my flat and then drive 2-3 hours to the client I am seeing that week.
Before moving to France I lived in the UK for 9 years and I am a UK national. Given my circumstances, can I claim travel expenses from home in France to the UK?
Expert's Answer: The travel rules fall into 3 categories. First - travel in the performance of the duties of the employment. Second - travel to temporary workplaces and thirdly - residents of the UK working outside the UK/non-domiciled foreign residents who work inside the UK.
It is important to note that these rules are applied in the order as detailed above. If the expense passes the first test, then you do not consider categories two or three. Similarly, if having failed the first test, the expense passes the test in the second category you do not consider the third. Only if the expense fails categories one and two do you consider category three.
The question posed is one where the travel expenses are not in the performance of the duties, making it necessary to consider whether the workplace is a temporary workplace.
On the assumption that the workplace is temporary, then the journey will qualify and the law is quite specific that the allowable mileage is that from home to the temporary workplace. If the temporary workplace is a considerable distance away from home, then provided the journey qualifies the reasonable cost of accommodation will be allowable. HM Revenue & Customs accept that where a person has rented accommodation in place of a hotel then the reasonable expense of such accommodation will qualify.
If a person enters the UK to work and the rules of residence dictate that there is a liability to UK tax, the travel rules will apply to that person in the same way as anybody else liable to UK tax. Relief for travel will be available in respect of travel from home to the temporary workplace. The fact that home is outside the UK does not matter provided that it is genuinely home and not just a residence abroad.
Contrary to popular belief, the fact that a person spends more time in one property than another does not make that property the person's home. Each case has to be looked at and is based on its individual facts. Home is normally the place where one's spouse and family reside. Where a person has a second home, it is more likely to be a second property where the person occasionally resides. Most of us have one property and one home. For those of us who have more than one property available for our use, it is normally quite clear which one is home.
On the assumption, therefore, that the property outside the UK is the person's genuine home as opposed to a property where they happen to live whilst in that country, travel expenses will be available from that property to the UK. The cost of reasonable subsistence will also be allowable and that includes the cost of the accommodation in the UK provided the cost is additional expenditure. It follows that if a single person who has been living with parents enters the UK, there will be no additional cost. In that situation, I also think HMRC would have a very strong argument to say that home is the residence of the UK.
The expert was Bob, the retired tax inspector.
Editor's note: Further reading - IT contractor expenses and travel expenses