24-month rule for travel and subsistence explained

Being a director of a limited company, entitles you to claim for legitimate expenses that relate ‘wholly, exclusively and necessarily for the running of the business.’ A full list of allowable business expenses is available in our Expenses Guide.

Included on this list are travel and subsistence expenses. But it may not come as a surprise to know that there are some complex rules and legislation governing it.

This is known as the 24-month rule and here is how it works:

24-month rule for travel

You are allowed to claim tax relief on travel and subsistence expenses for your journey between your home and your client’s premises, as long as it’s classed as a temporary workplace.

For a workplace to be temporary:

· Your contract needs to be less than 24 months

· You must spend less than 40% of your time at the workplace

If you exceed either of these, the workplace will be classed as permanent and you won’t be able to claim tax relief on the travel and subsistence expenses.

Here are some instances where a workplace will be classed as permanent:

· You worked at a location continuously for more than 24 months and you spent more than 40% of your time there

· If from the beginning or at a later date the contract will exceed 24 months e.g. your contract was originally 12 months, it’s then extended by another 12 months. The workplace will be deemed as permanent from the date it was extended i.e. 12 months

However, if your contract is originally longer than 24 months and you haven’t been claiming tax relief on your travel expenses, but then it’s shortened or changed. You can start claiming tax relief from the date the change occurs.

We often get questions regarding the 24-month rule. Here are some of the most frequently asked ones:

I’ve changed workplace but I’m still with the same client?

The 24-month rule applies to the location, not the client. But there must be a substantial change in your commute for the 24-month rule to restart.

There aren’t any concrete guidelines, explaining what is meant by ‘significant change’, so it’s taken on a case-by-case basis.

I work in more than one location?

For instance, if your contract is longer than 24 months and you’re asked to work at a second workplace for one day a week. Your original workplace will be classed as permanent, but your second workplace (i.e. where you spend 1 day), will be deemed as temporary due to spending less than 40% of your time there.

This applies even though your contract is more than 24 months.

I’m inside IR35. Can I claim tax relief?

If the specifics of your contract places you inside IR35, you’re not entitled to claim tax relief on travel expenses.

As you can see, this is a complex area of legislation, so it’s advisable to ask an experienced contractor accountant (like ourselves) for help and guidance.

If you’ve got a question for us about the 24-month rule or you would like to chat with one of our Directors, send us a message via our website or call us on 01962 867550.