Dear Contractor Doctor
I have a question about the 24 month rule. I work in a building that has three companies:
- Company A is my client, which I will be contracting with for just under 24 months
- Company B is a facilities management company supporting IT infrastructure for company A
- Company C is simply renting office space and totally unrelated to companies A and B.
If, at the end of my contract with company A, I got a contract with either company B or company C, would my 24 month rule be ‘reset’?
Contractor Doctor says:
The 24 month expense rule is quite clear when it states that a contractor may only deduct travel expenses for a given contract for so long as the contractor knows that the contract will last less than 24 months.
If the contractor renews the contract with client A, which will take the contractor to over 24 months, then travel expenses cannot be claimed. If the contractor changes department but is still working for client A, and that contract extends beyond 24 months, then the contractor cannot claim travel expenses, even if they are in a different office in the same building.
But a different client…
However, according to David Colom of contractor affairs specialist D J Colom, “If the contractor started a contract with another client that was totally separate from the original client yet in a different location within the building, there is nothing contrary in the rules to suggest that the 24 month rule could not be reset.”
So, in this case, if the contractor
- Worked 23 months for client A
- Won a contract with client C
- And client C has no relationship whatsoever with client A, apart from sharing office premises
- And the contractor is working in a different office or room in client C’s part of the building,
then the contractor would not be returning to work in the same part of the office building as they had worked in for client A.
In this case the 24-month rule would be reset and, as Colom explains: “We would be able to present a strong argument to HMRC that this was a totally separate contract and therefore not subject to the original 24-month rule.”
The contractor would therefore be able to continue to claim travel expenses and subsistence when working at this location as long as the contract was with client C, and there was no expectation that the contract would last for longer than 24 months.
We would be able to present a strong argument to HMRC that this was a totally separate contract and therefore not subject to the original 24-month rule
David Colom, D J Colom
But what about client B?
Client B is based in the same building as client A and manages client A’s IT infrastructure. There is a clear relationship between clients A and B and this relationship is, in fact, in the very operational area in which the contractor will be working.
The contractor could even find themselves returning to work on occasion in the same offices used when working for client A and working alongside employees and other contractors working for client A.
In this case, it is unlikely that HMRC would accept the argument that this is a new contract and the 24 month expenses rule would apply. As soon as the original 23 month contract was completed with client A, and a new contract started with client B, the contractor would be unable to claim for travel expenses and subsistence.
Good luck with your contracting!