The Two Year Rule For Expenses: An Explanation
There has recently been much discussion of the government’s regulations regarding temporary workplaces and the claiming of travel expenses to such a workplace. The regulations governing this issue are often referred to as the two-year rule, or 24 month rule.
What is a Temporary Workplace?
A temporary workplace is one where a worker attends there only to perform a task of limited duration or for a temporary purpose. In this instance a limited period is deemed to be 24 months or fewer. Where a worker attends, or expects to attend, a location for a period of less than 24 months the workplace is a temporary one.
Where a worker can reasonably expect to be at the same workplace for 24 months, or become aware that they might be, it would be deemed a permanent workplace. This would be applicable where a worker is employed on a permanent basis or as a temporary worker on a project which has duration of more than two years. As such, a workers intention and expectation can be viewed as being as important as the actual time involved.
An extension to the regulations relates to the movement of workers within a 24 month period. Where a worker changes sites on a regular basis but still has a consistent journey in terms of time, cost and destination, for example sites within the City’s square mile, the workplaces would all be deemed permanent.
It is not uncommon for a worker to return to the same place of work after a period of absence. Where the worker has spent more than 40% of their working time at that workplace in a 24 month period, even with a break in engagements, the workplace is considered permanent.
The Claiming of Expenses
Where a workplace is deemed a temporary one a worker is entitled to claim the cost of travel from their home to that workplace. However, where the workplace is deemed permanent the worker should not be claiming these expenses.
Where workers have been claiming the costs of travel to a permanent workplace they not only reduce their overall tax bill but gain an unfair advantage over more compliant workers. While HM Revenue & Customs (HMRC) legislate for the claiming of allowable expenses it would seem they are looking to clamp down on the non-compliant claiming of expenses.
The following table provides a basic summary as to which expenses are allowable for tax purposes and which are not:
| From |
To |
Description |
Tax Treatment |
Home |
Permanent workplace |
Ordinary commuting |
Disallowed |
Workplace |
Workplace |
Business travel |
Sometimes allowed |
Home |
Temporary workplace |
Business travel |
Allowed |
Home |
Depot |
Ordinary commuting |
Disallowed |
Summary
- The cost of a worker’s travel can only be claimed when the work is carried out at a temporary workplace.
- A temporary workplace is deemed one where the worker spends, or intends to spend, less than 24 months.
- For successive workplaces to be deemed temporary there must be a significant change in location.
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