Working away from home overnight -what can you claim when you are a UK limited company contractor as a genuine business expense? In addition, when are such expenses while you are staying away for work reasons tax-deductible? Under HM Revenue & Customs (HMRC) rules when you work away, besides your actual travel costs, you can also claim for an overnight allowance working away (UK), Therefore, besides making a claim for the HMRC working away from home allowance what else can you claim as a UK contractor? Notably, these thoughts will come about when you are claiming travel expenses as a contractor if you start working away.
While you are contracting, you may, from time to time during your ordinary commuting, need to spend a night away from home for business reasons. In addition, you may also obtain a contract that is too far to travel to and from each day. Therefore, staying away from home for work may be the best option while working at your contract location during the week.
Whether you are staying away for work occasionally in the UK overnight or for most of the week, you will need to check if you can claim tax relief on your expenses incurred and if you can claim a HMRC overnight subsistence allowance. Such expenses would include accommodation, meal costs and any other working away from home entitlements.
Working away from home overnight -what to consider
Types of accommodation
If you are staying away for work overnight for business reasons you will need some working away from home accommodation and this could be one of the following:
- A hotel.
- You may even rent a property especially if you are working away from home during the week.
Therefore, what can you claim as business expenses and pay tax-free when you are working away from home overnight?
What can I claim as tax-deductible expenses?
The good news is you can claim for the travelling expenses that get you to and from the contract location as well as other working away entitlements. Please note that this will include when you stay outside the UK due to working abroad. The types of travel expenses that your company can claim tax relief on for genuine business trips will include:
- Rail fares.
- Other forms of public transport.
- Food costs or scale rates, if you agree on a scale rate with HMRC first. The tax office will not often agree on these with limited company contractors due to them being a one-person operation.
Please note there is also a difference between how we treat business meals and meals of an entertaining nature for tax purposes. In addition, all the traveling costs you can claim are also subject to not falling foul of the two-year rule.
Depending upon the type of business that you do, you may be able to claim for your business clothing. However, there are specific rules on what you can claim.
We also have a separate guide covering relocation costs, which covers an instance where you are actually moving from your primary residence.
Furthermore, if you are considering contracting abroad, there are certain things to consider here too.
The choice of accommodation when you are working away from home overnight
Staying in a hotel or B&B
You can claim accommodation costs if you are staying away from home for business reasons in a hotel or B&B. What’s more, you can also claim for your meals, including breakfast, dinner, and evening meals, while working away.
Rent a property
If you are renting a property, you can claim the rent. Importantly, it would be best if you aimed to get the tenancy agreement in your company’s name.
You can also claim for the council tax and utility bills. In addition, you should also try and get the utility bills in your company’s name too.
While renting a property, you can claim your meals if you are eating out. Alternatively, if you are having your meals at your rental accommodation, you can claim for your shopping bills. Please be careful not to include any personal items on your shopping bills, and if you do, you will need to split these out.
Other instances when you may stay away overnight for business reasons
As a contractor limited company owner, making the decision to stay overnight would usually be if your contract site is too far away to travel back home from each day. However, while you may be able to claim for working away from home overnight you can also claim for the cost of staying away in other instances. This may include if you attend a training course or business-related seminar.
HMRC subsistence allowance -working away from home (UK)
The tax office also has fixed rates for a HMRC working away from home allowance (UK). These are standard meal allowances for people who work away from home. HMRC will update the maximum amounts that can be claimed as a working away meal allowance (UK) or subsistence allowances yearly. The last update was on 7 April 2019, and the official HMRC working away from home allowance rates for meals since this date are:
- £5 per day for travel of 5 hours or more.
- £10 per day for travel of 10 hours or more.
- £25 per day for travel of 15 hours or more, or if the travel is ongoing after 8 pm.
Further areas to consider
Working away from home overnight -obtain receipts
You should obtain receipts or invoices for accommodation costs as part of your accounting records. Furthermore, you should also get receipts for any other expenses you claim while you work away.
Overnight allowance working away (UK) -Personal Incidental Expenses (PIEs)
Whether you stay in a hotel or B&B or renting somewhere, you can also claim a work away from home allowance to cover any incidental overnight expenses. This working away allowance (UK) is known as Personal Incidental Expenses (PIEs). You can claim for PIEs overnight allowances for each night that you stay away overnight for business purposes. The PIEs overnight allowance working away rates are £5 per night in the UK and £10 per night outside the UK.
The PIEs working away from home allowance (UK) is there to cover sundry expenses, such as coffees, phone calls home, and laundry. Please note, you do not need to get receipts for the overnight allowance working away costs that the PIEs cover.
24-month rule for contractors and those who work away
When you claim for your costs while working away, they are subject to the 24-month rule. for UK contractors. Please note that once you know you will be based at your current work location for longer than 24 months (and spend more than 40% of your working time there), you will no longer be able to claim for your travel expenses and PIEs, etc.
This article highlights what you can claim tax relief on when you staying away for work reasons. We also cover what is available as a HMRC working away from home allowance. As in all cases, when you claim business expenses, they should be `reasonable’ and not excessive. In addition, you should also make sure that you do not fall foul of the 24-month rule. Failing either of these tests will result in the expenses becoming subject to Income Tax and National Insurance contributions.
Link to Contractor Advice UK group on