He gives an example: “Let’s say a contractor wins a 12-month contract with a bank. This, according to Abbott, works on the basis of expectation: “As soon as a contractor knows that they will be spending 24 months or more at a temporary workplace, then the location ceases to be a temporary workplace and the contractor cannot claim expenses.” In practice, if a contractor is going to spend more than two days out of five during a typical working week on a client’s site, then they have to work to the 24-month rule. ![]() “If the contractor exceeds the 40% rule, then as long as they don’t expect to work at that location for more than two years, then they can continue to claim travel expenses. Abbott explains: “A workplace is temporary as long as contractor spends no more than 40% of their time there. ![]() To qualify as a temporary workplace so that a contractor can claim travel expenses, the location must satisfy HMRC’s 40% and 24-month rules. “You must keep your receipts and be able to produce them if the taxman asks for them.” “Although some service providers claim that contractors do not have to retain business travel receipts and records, this is incorrect,” adds Abbott. However, both limited company and umbrella company contractors must retain copies of receipts and tickets, and detailed mileage logs, so that they can prove the journey actually took place if investigated by HMRC. Mileage for car journeys, road tolls and parking.The costs of public transport such as train, underground, tram, coach, bus and ferry journeys.Record keeping and receipts are essentialĪbbott notes that as long as the travel expenses qualify, then a contractor can claim: This means when working in a client’s offices or another location, the contractor is working at a temporary workplace,” says Abbott.Īs long as the travel costs satisfy the usual ‘wholly, exclusively and necessarily in the performance of duties’ test, then the contractor can claim the cost of travel from their home office to the client’s site, and back again.Ībbott warns contractors to ensure that the principal purpose of the travel they claim is for business, so they avoid the ‘duality of purpose’ trap: “If a contractor based in Glasgow is visiting family in Dundee, and then tacks on a visit to a nearby client so they can claim expenses, then this is likely to be challenged by HMRC.” “For most contractors, their permanent place of work is their home office. “Umbrella company contractors can also benefit from claiming expenses provided they are not subject to supervision, direction and control (SDC).”īut HMRC has strict temporary workplace rules about the circumstances under which contractors can claim travel expenses, depending on the type and location of the contract and the time spent working at each client site.Įligible travel costs: ‘wholly, exclusively and necessarily’ “Limited company contractors pay less tax on profits, and less cash out of their own pockets, when working onsite with clients, because they can legitimately claim travel costs,” explains James Abbott, owner and head of tax at contractor accountant Abbott Moore. ![]() But this is only possible for as long as a contractor stays within HMRC’s 24-month and 40% rules about temporary workplaces. Contractors can claim travel expenses from their limited company, which can in turn enjoy corporation tax relief, when working on a client’s site.
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