Working away from home overnight

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Introduction 

Let’s consider working away from home overnight when you’re contracting in the UK. Can a contractor claim travel expenses when they work away (UK)? What can you claim as a contractor as business expenses if they can? Also, if you’re a UK limited company contractor and are staying away for work reasons, when are such working away expenses and overnight subsistence costs tax-deductible? Under HM Revenue & Customs (HMRC) rules, costs are tax-deductible when incurred wholly, exclusively, and necessarily for business purposes. Therefore, your expenses must always meet this rule. When you work away, besides your actual travel and subsistence (UK) costs, you can claim an HMRC overnight allowance working away (UK). Indeed, some don’t know about this allowance, so they miss out. However, when you’re away regularly and claim for the HMRC working away from home allowance, these will save tax.

For contractors who work away from home regularly, there are potential tax savings to be made. Besides the staying away or overnight expenses allowance, is there anything else you can claim while away from home for business reasons? As we’ve established, you can claim the HMRC allowance while away. However, what else can you claim as a UK contractor? You’ll probably ask this if you start working away and, as a result, are claiming travel expenses as a contractor.

Initial thoughts 

First thoughts

This guide is designed to provide you with practical tips and information while you’re away on business. It will help you discover what you can claim for working away expenses. Also, we’ll explore what to consider when you’re claiming accommodation for work. We’ll look at working away from home tax deductions and the £25 overnight allowance (HMRC) later. Moreover, we’ll investigate what you can claim for overnight expenses and an overnight allowance (UK) when you work away and stay near your work location. Finally, we’ll research the official HMRC subsistence rates (UK) and the daily allowance rules.

As a contractor, your work may take you to various locations, and sometimes, your ordinary commuting may require you to spend a night away from home for business reasons. This can be challenging, especially if you obtain a contract that’s too far to travel to and from each day. In the UK, many workers and contractors with work away jobs or contracts find themselves having to stay away overnight near their workplace. We understand that staying away from home for work while staying at your contract location during the week may not be the most comfortable option, but it’s a reality many contractors face.

Do research on what you can claim

While contracting, you may start staying away for work occasionally in the UK overnight or for most of the week. Therefore, you should check if you can claim tax relief on the expenses you incurred and an HMRC overnight subsistence allowance. While working away, limited company contractors should determine what they can claim through their business. Business expenses would include accommodation and any subsistence expenses such as meal costs. In addition, there may be other working away entitlements.

Common questions on working away from home

Both contractors and workers alike have specific questions when they stay away overnight for business reasons on some occasions. Therefore, these include:

  • What’s the subsistence allowance HMRC?
  • Can I claim tax relief for working away from home?
  • Can you claim food expenses when working away?
  • Is there a food allowance when working away from home?
  • How much is working away from home allowance?
  • What’s the subsistence allowance UK?
  • What’s the Ltd company subsistence allowance?
  • How much is the overnight meal allowance in 2024?
  • What’s the staying away from home allowance?
  • What is an overnight allowance?
  • Should I get paid extra for working away from home?

In this guide, we’ll look at what a contractor who works away can claim as genuine business expenses. This includes your business expenses and any working away from home allowances.

What factors should be considered when staying overnight for work-related purposes? 

Types of accommodation for contractors

If you’re staying away for work overnight for business reasons, you’ll require some working away from home accommodation, and this could be one of the following:

  • A hotel.
  • B&B.
  • You may even rent a property, especially if you’re away from home during the week.

Therefore, besides contractors’ accommodation costs, what can you claim as business expenses and pay tax-free when you work away? 

What can I claim as tax-deductible expenses?   

The good news is you can claim for the travelling expenses to get you to and from the contract location. Also, you can claim for your contractor subsistence expenses and working away entitlements. This includes when a contractor stays outside the UK due to working abroad. Therefore, if you’re an IT contractor being paid for travel (or any other sort of contractor), the types of business travel expenses your company can claim tax relief on for genuine business trips will include:

  • Mileage.
  • Rail fares.
  • Flights.
  • Other forms of public transport.
  • Meal expenses when working away from home.
  • HMRC expenses rates while working away.
  • 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. This is due to them being a one-person operation.

There’s also a difference between how we treat business meals and meals of an entertaining nature for tax purposes. Moreover, all the travelling costs you can claim are subject to not falling foul of the two-year rule (please see later in this guide).

Depending on your type of business, you may be able to claim for your business clothing. However, there are specific rules on what you can claim.

We have a separate guide covering relocation costs. This covers an instance where you’re moving from your primary residence.

Furthermore, if you’re considering contracting abroad, there are certain things to consider here too.

HMRC has a general guide covering expenses and benefits concerning business travel. There’s also a guide covering your travel costs, explaining what you can claim when employed. HMRC’s Appendix 480 details what you claim when working away as a contractor or employee.

The accommodation choices when you’re working away from home overnight 

Stay in a hotel or B&B   

You can claim overnight costs if you stay away from home for business reasons in a hotel or a B&B. You can also claim the costs of meals, including breakfast, dinner, and evening meals, when you work away. 

Rent a property   

If you’re renting a property, you can claim the rent. Also, the best option is to get the tenancy agreement in your company’s name.

You can claim council tax and utility bills as part of a property rental. In addition, you should try to get the utility bills in your company’s name.

While renting a property, you can claim your meals if you’re eating out. On the other hand, if you’re having your meals at your rental accommodation, you can claim your shopping bills. Please be careful not to include any personal items on your shopping bills. However, if you do, you must split these out.

Which other instances might you stay away overnight for business reasons?

As a contractor limited company owner, deciding 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 costs when you work away, you can also claim the cost of staying away in other instances. This may include if you attend a training course or business-related seminar.

HMRC guidelines

HMRC subsistence allowance –working away from home (UK)

The tax office has fixed rates for working away allowances and these are known as the HMRC subsistence rates 2024. There are standard meal allowances for people who work away from home. HMRC will update the maximum amounts claimable as a working away meal allowance (UK) or subsistence allowances yearly. As of 2024, the official HMRC working away from home allowance rates per day for meals inside the UK are:

Minimum journey time Maximum amount of meal allowance
5 hours £5
10 hours £10
15 hours (and ongoing at 8 pm) £25

The £25 overnight allowance (HMRC) is a flat allowance you can claim in line with the above. However, this is to cover your meal costs; therefore, you can’t claim meal costs in addition to this. 

Further areas to consider 

Obtain your receipts when you work away   

You should obtain receipts or invoices for accommodation costs as part of your accounting records. Furthermore, collecting receipts for any other expenses you claim while away is necessary. 

Personal Incidental Expenses (PIEs)   

Whether you stay in a hotel room or B&B or rent somewhere, you can claim a work away from home allowance to cover any incidental overnight expenses. This working away allowance (UK) or overnight subsistence allowance is known as Personal Incidental Expenses (PIEs). You can claim for PIEs overnight allowance (HMRC) for each night you incur overnight stays for business purposes. The HMRC overnight allowance working away from home rates for PIEs are £5 per night for overnight stays in the UK and £10 per night outside the UK.

The PIEs allowance covers various expenses. This includes coffee, phone calls home, and laundry. However, you don’t have to get receipts for the overnight allowance working away costs the PIEs cover.

24-month rule for contractors when you work away

When you claim for your costs while working away, they’re subject to the 24-month rule for UK contractors. This rule relates to claiming tax relief, such that you can only claim it for a temporary workplace. Therefore, once you know you’ll be based at your current contract location for longer than 24 months (and spend more than 40% of your working time there), you’ll no longer be able to claim for your travel expenses and PIEs, etc. 

Final thoughts

This guide highlights what you can claim tax relief on while contracting in the UK and staying away for work reasons. We cover what’s available as an HMRC working away from home allowance. As in all cases, when you claim business expenses, the amounts you claim should be `reasonable’ and not excessive. Any costs you claim should be incurred wholly and exclusively for your business. Moreover, you should ensure you don’t fail the 24-month rule. Failing any of these tests will result in the expenses becoming subject to Income Tax and National Insurance contributions.

Link to Contractor Advice UK group on

LinkedIn    https://www.linkedin.com/groups/4660081/

Published On: April 6th, 2024 / Categories: Expenses, Member Only Articles, Running Your Own Company /

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