If you have to travel to a temporary place of work for business purposes, you can usually claim back the costs of travel. However, the 24-month rule exists to prevent travel reimbursements when HMRC deems a workplace to no longer be ‘temporary’ in nature.
What is a temporary workplace?
You can reclaim for travel expenses to and from a temporary workplace, which is defined as somewhere you would go for a limited duration (this often applies to IT contractors and consultants) or some other temporary purpose (see EIM32075).
Assuming you are eligible to reclaim travel expenses by virtue of attending a temporary workplace, this concession is subject to the 24 month rule.
What is the 24 month rule?
According to HMRC, a workplace can only be considered ‘temporary’ for a period of up to 24 months. After this point, an individual can no longer reclaim for the costs of travel as the workplace has become a ‘permanent’ one.
This basic rule is subject to number of additional qualifications, which we look at below:
What is the 40% rule?
If an individual has spent, or is likely to spend, 40% of his/her time or more at the workplace for more than 24 months, then they cannot reclaim travel expenses.
This is a particularly complex aspect of the travel expense rules, as it also has a backdating element.
If you return to a workplace you have previously attended, in order to work out if you can reclaim travel expenses, you must look back at the previous 24 month period, and if you spent 40% or more of your time at that workplace, you cannot reclaim any travel expenses from the time you returned.
There are a series of HMRC examples of how the 40% rule works in practice.
Becoming aware that your assignment will last longer than 24 months
Importantly, the moment you realise that your assignment at a ‘temporary workplace’ will last for more than 24 months, you must stop reclaiming travel expenses from that moment onwards.
HMRC provide a good example of how this additional rule works in practice – see EIM32106.
If a ‘computer consultant’ has worked at a temporary workplace for 18 months, and then his contract is extended by a further 18 months, he can only reclaim travel expenses for the duration of the first 18 month contract. The second contract will extend the time he spends at the workplace beyond 24 months, and therefore the workplace is deemed to be a permanent one from 18 months onwards.
If you are unsure whether or not your contract will extend beyond 24 months, you can validly claim travel expenses for the whole 24 month period before you must stop claiming.
Discuss any queries you have about how travel expenses work with your accountant (if you are a limited company worker), or account manager (if you use an umbrella company).