The 24-month rule for contractors (temporary workplace rules) & hmrc travel expenses 24 months

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What is the 24-month rule for contractors, and how does this relate to claiming tax relief for employee travel expenses through a limited company or as a sole trader? If you are a limited company contractor who runs your own company, are you aware of how this relates to temporary workplace rules? Let’s take a look into what is the 24-month rule (HMRC) when you are looking to claim tax relief on travel expenses and subsistence costs.

When you are claiming travel expenses as a contractor these will make a difference to your overall take-home pay. This is especially true when you are commuting long distance to your place of work. Claiming travel expenses to work each time you travel there will be most welcome, however there are temporary workplace rules to consider before you do this.

In general, the cost of commuting between home and a permanent workplace is not a business expense, and you are unable to claim this against tax. If an employer pays or reimburses the cost to the employee, this will be taxable on the latter, just like any other form of income.

Initial thoughts -temporary workplace rules and the 24-month rule (HMRC) for contractors

Please note that the cost of travelling to a temporary workplace is a tax-deductible expense. If an employer pays or reimburses such employee travel expenses, the amount the employee receives is not taxable. The business will also receive temporary workplace tax relief on your contractor travel expenses via its tax bill.

Further to this, there is no definitive definition of what a temporary place of work is. Indeed, this is except to say that it is not a permanent one.

The temporary workplace rules are not a straightforward subject, and if you would like an accountant knowledgeable in such areas and you feel your accountant is not up to this, please look at how you can change your accountant.

The types of costs that the 24-month rule (HMRC) applies to

The types of employee travel expenses we are talking about will include any costs incurred when you travel to a worksite. Therefore, when you are claiming travel expenses as a contractor such costs will include:

  • Rail fares.
  • Taxi fares.
  • Flights.

24-month rule (HMRC) for contractors -considerations   

A permanent site 

A permanent site is defined as the only place of work for the employee while working for the employer. In this context, the employer does not mean the client you are providing your services. Neither does it mean to any agency via whom you work. Where a contractor provides their services via their own company, their company is the employer. Therefore, there are two factors that you will need to consider as part of the temporary workplace rules:

  • A site where the employee has come to expect to work for over 24 months. It is the reason why the heading above is ‘The 24-month rule.’
  • `Expectation’ means that the employee knows the position. For example, the employee has signed a contract extension that bases them at that contract site for longer than 24 months.

Furthermore, another item to think about with the second point above is the 40% rule. For the site to be permanent, you would need to spend at least 40% of your time on average at the worksite.

Therefore, as a limited company contractor, you could potentially have two permanent places of work simultaneously.

For instance, you could be spending 50% of your working time at one worksite and 50% at another site. Your contractor travel expenses between home and either location would not be tax-deductible. To clarify, this is because you would be commuting to two permanent places of work. However, your journeys between the two sites would be tax-deductible.

There is a further twist to the HMRC travel expenses 24-month rule

A contractor could take on a contract not in connection with their previous one. Perhaps with a different agency or even with a different client. The contractor travel expenses between home and the new site are “substantially the same.” Indeed, this is when comparing them to those to and from the previous location. If this is so, HM Revenue & Customs (HMRC) will treat the journeys as if they were to the same site as the previous one. Doing so would make it more likely that the HMRC 24-month rule would apply. This rule might not seem logical, and it may even seem unfair. However, this is how it is.

HMRC has not, to date, and probably never will define what “substantially the same” means.

HMRC’s example for the contractor expenses 24-month rule

The example HMRC quote in their literature on the subject concerns a person whose next contract is with a different agency. The services are for a different client but one whose worksite is within a short distance of the former worksite. In their example, it is just around the corner. When judging whether journeys are substantially the same or not, this will be obvious in most instances. For any non-obvious instance, the contractor must come to their judgement. They will then have to hope this is right or proceed to submit the facts to HMRC seeking their opinion.

When a contractor relocates to a different site in a working context and the journeys that are not the same as those of the previous one, the 24 months will start over. As a result, they will be able to claim for their employee travel expenses once again.

A record for claims for miles travelled to and from a worksite in a vehicle provided by the contractor should be kept. This record should be made by you and be one that shows a mileage log of the journeys. The mileage log needs to be a simple list of the dates travelled. The mileage list should also contain:

  • Where from and where to.
  • How far.
  • When it is not apparent, the purpose of the journey.

Whenever possible, there should be a record of all other forms of travel. This will include the costs of staying overnight in accommodation closer to the client’s site rather than at home. These costs should be backed up by tickets, receipts, and invoices. Without such third-party proof, HMRC might reject the claim.

Illustration of the HMRC 24-month rule for contractors

Part one 

Suppose a contractor contracts to provide services to a client for nine months. This length of time is less than 24 months. It would mean that the cost of contractor travel expenses between home and the clients’ worksite will be tax-deductible. This claim provides that the journey does not fall foul of the expectation of being there for 24 months. Indeed, this is as per the rule above.

Next, let us move on to the end of the nine months contract. The client requests the contractor, who accepts, to renew the contract for a further nine months. Because the worksite is the same, HMRC would regard the two continuous periods as one in this context. Therefore, the period working at the site has now become eighteen months. Furthermore, in the context of not falling foul of the expectation of being there for the HMRC 24-month rule above, let us consider the cost of journeys between home and the worksite again.  As eighteen months is less than 24 months, it is still ok to claim, and the costs will be tax-deductible.

Finally, let us move on to the end of eighteen months. The client requests the contractor, who accepts, to renew the contract for a further nine months.  The total of the continuous periods at the same worksite has now become twenty-seven months.

Part two 

From the moment of signing this renewal, the contractor expects the time he will be working at the client’s site is more than 24 months.  Therefore, the HMRC 24-month rule applies from that moment, and the site has become the contractor’s permanent place of work.

Consequently, from that moment onwards, the costs of journeys between home and that site are no longer tax-deductible. The expenses of journeying to the client’s location remain tax allowable up to the moment of signing the renewal.

Furthermore, what if the renewed contract terminates prematurely? The continuous periods at that client’s site become less than 24 months. In this case, the cost of journeying between home and that site after the renewal’s signing is still not taxed allowable. This is because of the expectation that the position would have lasted beyond 24 months.

The 24-month rule (HMRC) -breaks in attendance

A contractor may have worked at a particular worksite for more than 24 months (and spends more than 40% of their time there) and can no longer claim their travelling expenses to get to and from that worksite. The contract work may finish for one reason or another; however, the contractor returns to this worksite in the future.

There are no set rules regarding breaks in attendance and when the 24-month clock would start again when someone returns to the same worksite. However, a break for three or four months would probably be enough to justify the 24 months beginning again once the contractor returns to the site.

Final thoughts 

As shown above, there can be some very complex rules for you as a UK limited company contractor when making your employee travel expenses claims for business travel. Some of these rules are not always very clear or easy to understand when you look to determine the allowable business expenses. A good contractor accountant will help guide you when navigating the rule above. We hope this guidance here with regard to the temporary workplace rules and 24-month rule for contractors has helped to make these a little clearer.

Link to Contractor Advice UK group on


Published On: August 1st, 2022 / Categories: Expenses, Member Only Articles (Technical!), Running Your Own Company /

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  1. Shepherdspie December 18, 2020 at 9:41 am - Reply

    My initial contract was open ended but was not expected to last longer than 18 months (but after planning etc it was going to last close to 22 months). However, COVID got in the way and now it will last approximately 30 months (even though I had a period where I was unemployed with the company of approximately 3 months during the first lockdown and I have been working from home for the past 2 months). I understand the 2 year rule (although I was unaware of the ‘substantially the same’ element which may put the kibosh on my next potential employment). My contract states until work is complete but clearly, through no fault of my own, I am not in a position to complete before 2 years is up. I am concerned that they will try and get me to remain contractually which will affect all claimed and future expenses until completion. However, from my understanding I must leave employment at my 2 year point irrespective of if my client decides to pay my expenses or not.

    • scott291074 December 19, 2020 at 5:43 pm - Reply

      Hi there

      There is no definitive rule but a three month gap may be okay for the two year clock to start again.

      In addition, the two year rule is based on when you sign extensions etc i.e. as soon as you sign an extension basing you beyond the two year point is when yo stop claiming for your expenses (not when you reach two years).

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