The 24 month rule for contractor travel and subsistence

This guide explains the 24 month travel and subsistence expense rules and how they apply to contractors.

How do the rules work in practice, and how do you calculate your eligibility to claim travel and subsistence expenses?

Can all contractors claim for travel and subsistence expenses?

No, it depends on several factors.

You can usually claim such expenses if you’re a limited company contractor and your work isn’t caught by IR35.

If you are an umbrella company contractor, you might be able to claim as long as your work is not performed under your client’s Supervision, Direction, or Control (SDC) — rules introduced in 2016.

However, the threshold to fall outside SDC is high, and many umbrella companies do not process travel expenses at all.

If you’re confident that your work does not meet the definition of SDC, you may still be able to claim tax relief on travel expenses at year-end via self-assessment.

The 24 month rule – what is it?

You may be able to claim travel and subsistence expenses if you work at the same location for less than 24 months. In other words, the site must meet HMRC’s definition of a ‘temporary workplace’.

If you know from the outset that a contract is likely to last beyond 24 months, you must not claim any travel expenses between your home and place of work from day one.

If at any stage it becomes clear that your contract will exceed the 24 month threshold, your eligibility ends immediately.

For example, if you have a renewal at 18 months which takes you beyond 24 months, you can no longer claim.

Or, in HMRC’s words:

• in the course of a period of continuous work at that place lasting more than 24 months, or
• if it is at a time when it is reasonable to assume that it will be in the course of such a period.

How does the 40% rule work?

One complication arises when contractors return to a workplace they have previously attended. These situations are governed by the “40% rule”.

If, over the previous 24 months, you spent 40% or more of your time at your current workplace, you cannot claim travel expenses.

For more detail and examples, consult EIM32080.

Calculating this percentage can be complex and may change over time, so professional advice is recommended if you are unsure.

What type of expenses can be claimed under the 24-month rule?

• Travel expenses (fuel, public transport, parking)
• Accommodation costs where overnight stays are required
• Meals and subsistence while working away from your usual residence

What happens if my contract is extended beyond 24 months?

If your contract is extended and you breach the 24 month threshold, your workplace is no longer considered temporary from the point you become aware of the extension.

Any claims made before that point remain valid.

What if I only work part-time at the location?

If you spend less than 40% of your time at a particular site, it may still be treated as a temporary workplace, even if the engagement lasts more than 24 months.

The rule is based on the proportion of time spent at that location.

How does IR35 impact the 24 month rule?

If your contract is caught by IR35, you are treated as an employee for tax purposes, and your ability to claim travel expenses is restricted.

If your work is outside IR35 and you operate via a limited company, you can usually continue to claim, provided the workplace remains temporary.

Can I claim expenses for contract work at multiple sites?

Yes. If you work at several temporary workplaces within the 24 month timeframe, you can claim for each, provided none becomes your permanent place of work.

What if my new contract is in a similar location to my previous one?

If you work for one client in a particular area and then start another role nearby, this may not represent a significant change in location for HMRC purposes.

Our tax advisory partner, Qdos, states:

If there is no significant effect on the distance travelled, direction, time or cost, HMRC ultimately treats the two workplaces as one.

How do I work out when the 24-month rule starts?

The 24 month period begins when you start working at a particular site, not necessarily the contract start date.

If you move between different sites for the same client, each location may trigger a new 24 month period, provided it qualifies as a separate temporary workplace.

What if my contract ends before 24 months but resumes later?

If a contract ends and later resumes at the same site, the rule may reset. However, HMRC may examine whether the break represents a genuine gap in work.

Short breaks may not reset the clock.

What records should I keep to comply with the 24-month rule?

• Clear records of all expenses claimed, including receipts
• Evidence of contract start and end dates
• Documentation showing expected duration at each workplace
• Records of any changes to contract length or location

Can I claim expenses if I’m a permanent employee working at a temporary location?

No. The 24 month rule is intended for genuinely temporary workplaces. Permanent employees are subject to stricter rules.

What should I do if I’ve claimed expenses beyond the 24 months?

If you have incorrectly claimed expenses beyond the 24 month threshold, you should inform HMRC and amend your tax return.

Overclaiming may result in interest and penalties. If unsure, seek advice from your accountant.

According to our partner, Qdos:

If a contractor has been incorrectly claiming travel and subsistence, HMRC will reclassify the amounts as income, and the contractor will need to pay tax on it.

Make sure you ask a professional for advice before making a claim

The rules governing travel expenses are complex. If you are unsure whether you can claim, speak to your accountant or umbrella company.

For the detailed guidance, see HMRC manual EIM32080 here. You may also find our guide to allowable contractor expenses useful.