Contractors' Questions: Is this a workaround to the 24-month rule?

Contractor’s Question: I’m aware there’s effectively a two-year 'limit' on contracting at temporary workplaces for expenses purposes, so I'm looking at returning to a company after a discreet gap of three months out.

Would this gap still count towards the two-year time period if I subsequently take another contract with the same company and, if not, how long a gap would be sufficient to not count? Please note; I envisage me terminating one contract (on a time basis), never extending a contract then seeking a new contract with the original client.

Expert’s Answer: This may be a case of a little knowledge being a bad thing. It would appear that you are engineering your contracting pattern around what is more commonly known as the ’24-month’ rule. This rule is HMRC’s attempt at trying to differentiate between what is a ‘temporary’ workplace and a ‘permanent’ workplace; the significance being that travel to and from (and subsistence while there) the former is currently treated an allowable expense. It may be worth you reading up on the HMRC guidance on the rule and the various other links within that guidance for a fuller understanding.

Unfortunately for your circumstances, there is no statutory definition of ‘how long between assignments is sufficient’, as each case must be viewed on its merits. But a three-month pause, and then a return to exactly the same workplace, is unlikely to impress HMRC. 

In addition, you need to be aware of the “40%” rule which trumps the 24-month rule – where more than 40% of your work time is spent at the same site; then this site will be treated for tax purposes as a permanent site. It is this rule which prevents agency staff from claiming expenses because HMRC treats each agency assignment as a totally separate and discrete assignment to tax purposes.

The expert was Neil Kellaway, Operations Manager at Intouch Accounting.

Editor’s Note: Related Reading –

Contractors’ Questions: Can I claim if a short gig ends up lasting 25 months?

Tribunal tackles ‘control’ in false self-employment

Contractors’ Questions: Can I claim tax relief on expenses and how?

Wednesday 29th May 2019
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Written by Neil Kellaway

Neil started a career as an Accountant in 2011, specialising in helping hundreds of contractors. Neil enjoys building relationships with clients and helping them manage their finances all the way through their contracting career. Whilst also helping manage and develop the next Accountants within Intouch.
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