As you may already know as a director of your own limited company you may incur business-related travel expenses but what isn’t commonly known is the 24 month rule which specifically relates to travel and related subsistence expenses.
The purpose of this rule is to determine when a workplace is classed as “temporary” and when it is classed as “permanent”. Corporation tax relief can only be claimed if your place of work falls into the “temporary workplace” category.
It is important to note that this rule is based on time or expected time spent at a specific workplace. Consequently, even if you are using a different agency, have an extended contract or working on a new project but remain at the same workplace it is a continuation of time spent at that specific workplace.
Temporary
If your time at the workplace will last less than, or is expected to last less than 24 months, the 24 month rule is not broken and the workplace would be classed as temporary. Travel & subsistence claims can be claimed.
Permanent
If your time at the workplace will last more than, or is expected to last more than 24 months, the 24 month rule is broken and the workplace would be classed as permanent, Travel & subsistence claims would not be allowed to be claimed from day 1. If however less than 40% of your overall time is spent or expecting to be spent at that particular workplace it can still be classed as temporary, this is known as the 40% rule.
Temporary to permanent
If your time at the workplace is expected to be less than 24 months but something changes whereby the workplace is then expected to last more than 24 months, Travel & subsistence claims cease from the date of the change.
Permanent to temporary
If your time at the workplace is expected to be more than 24 months but something changes whereby the workplace is then expected to last less than 24 months, Travel & subsistence claims are only allowable from the date of the change.
Break from Location
A break in the location, however long or short, does not ’reset the clock’. If you are returning to a previous workplace, you are best discussing the specific circumstances with your accountant.
What next?
If you would like to discuss this in any further detail with specific details of your circumstances, please contact your dedicated accountant who will be able to advise the best way forward.
Since 2002, ICS has been supporting contractors, freelancers and small business owners across the UK. If you’d like to hear more about how we can help, call our friendly team on 0800 195 3750 or email newbusiness@icsuk.com!
