Travel and subsistence claims

Here’s a refresher for contractors with limited companies as HMRC have been reported as cracking down on this tax rule recently.

The expenses you can claim against tax for travel and susbsistence varies massively depending on whether you are at a “temporary workplace” or a “permanent workplace”.

Firstly, to have a temporary workplace (which is tax advantageous) you must also have a permanent workplace.  For contractors with their own personal service company, it could be argued that the permanent workplace is where their limited company is based which typically is their home address.  It is envisaged that this permanent workplace will exist for many years and will overarch several temporary contracts with agencies/end clients.

Contracts that oblige you to travel to geographical locations to undertake work then have the potential to qualify as temporary workplaces enabling enhanced tax claims for travel and subsistence costs.

However, as soon as you anticipate working at a temporary workplace for more than 24 months it will be reclassified as a permanent workplace resulting in the loss of these tax claims.  E.g. if you have been working at a location for 20 months and your contract is re-newed for a further 6 months you can no longer claim travel/subsistence costs after month 20.

In order to reset your workplace to temporary status you have to satisfy two rules

  • the location must be at least 10 miles from the previous workplace;
  • the route/journey must be substantially different.

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