Travel expenses and the 2 year rule

Travel expenses and the 2 year rule

Temporary workplace

Commuting to a permanent place of work is not an allowable expense, but travelling to a temporary place of work may be permitted. However, journeys to/ from your home to a temporary workplace are allowable if the contract is expected for less than two years; or if the contract is for more than two years, but you spend less than 40% of your time at the site. This two-year rule is applied to intent. This means that if the contract is intended to be 36 months, nothing is claimable (unless you can use the 40% exemption).
 
If the 36-month contract is reduced to 20 months at month 12, then although nothing is claimable for months 1-12, a claim can be made for months 13-20, or if a 20-month contract is extended to 30 months at month 16, then a claim can be made for months 1-15, but not for months 16 onwards.
 
A restriction applies to the location of temporary workplaces. This restriction class two workplaces as one if they are close together, even if they are unrelated, e.g. different clients. The example that HMRC gives in their guidance is a contractor working at one bank in the City and then moving to another close by – these workplaces would be treated as the same place for the 24-month test. Please see the following link to HMRC guidance on employee travel. Sections 3.18 - 3.23 specifically relate to the 2-year rule.
 
Anti-avoidance
If there is a change of workplace, but the journey is substantially the same, the change of workplace is ignored, and time spent at the different workplaces is aggregated for the purpose of the 24-month rule. Please see the following link for further HMRC examples of temporary workplaces. There is another example here. Attending another workplace for a short duration and returning to the original workplace will not count. The 24-month rule will still apply if you spend more than 40% at the workplace (or workplaces close by) over 24 months.


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