Travel and Subsistence tax relief
What is it?
Limited company directors, including independent professionals working through their own limited company – referred to by HMRC as Personal Service Companies (PSCs) - are currently able to claim tax relief on travel and subsistence expenses.
This means in many cases they can legitimately offset costs incurred when travelling to and from their clients’ premises and, where the those premises are a long way from their base, they can claim for temporary accommodation and food costs.
All expenses must be wholly and exclusively business related and must be considered ‘reasonable’.
What’s the 24 month rule?
With travel expenses specifically, the expenses are only allowable for 24 months. The whole basis of the rule is to give workers some relief when working at a temporary workplace. Beyond 24 months, this workplace is no longer considered temporary but classed as permanent, unless less than 40% of the time is spent on that specific workplace.
It should be noted that once it becomes clear that the engagement will exceed 24 months, the ability to claim for travel immediately ceases. In other words, you may not be able to claim for the whole two year period. If, for example, it’s a three year contract, you won’t be able to claim for travel at all.
The government has aligned Travel and Subsistence tax relief rules with those of IR35, meaning if you are IR35 caught you are also unable to claim tax relief on these expenses. Please take a look at our IR35 page for more information on those rules.
The alignment of the T&S law with IR35 may have immediate implications for contractors working in the public sector as IR35 has also been recently tightened for them. Because of the change to IR35 contractors in the public sector may find themselves forced into IR35 and therefore no longer able.