The ’24 month rule’ is a term you may have heard being bandied around by fellow contractors during your time going solo, and it accounts for two important aspects of contracting: travel and expenses. But what does the rule entail – and why should you be thinking about it? We’ve assembled some essential advice to help.
What Exactly is the 24 Month Rule?
Although especially important to contractors, the 24 Month Rule is often forgotten about and overlooked. In short, if you continue to work at the same single location for more than 24 months, you are no longer able to claim any travel expenses on costs incurred by heading to and from work. Why? Because your workplace is no longer deemed ‘temporary’.
Why is it Important to be Aware of the Rule?
Although it sounds simple enough, the 24 Month Rule requires some foresight into what a client will require from you; the rule takes effect from the date you’re aware you’ll be travelling to a location for over 24 months. Also, if you’re used to claiming travel expenses because the journey is quite a long one, it can come as a bit of a sting to your finances.
What Should I Do?
There are a few options to take to negate the 24 Month Rule. Firstly, before signing any contracts ensure that you fully understand how long your client would like you in that location – if it goes over the 24 month time period, you’ll know in advance and be able to prepare. If you know that the contract will take you over 24 months, you should stop claiming expenses from the moment it’s signed. Being prepared is key, so factor in travel costs to your pricing and budget.
Important Things to Remember
Apart from the above, an essential point to remember is that the 24 Month Rule applies to the location that you’re working at, rather than any client in particular. Because of this, the only way to reset the 24 month clock is to make a significant change to your daily commute. Also, in terms of IR35 – as reported on in a previous article – the rule and IR35 legislation are totally separate; travel expenses can be claimed inside or outside IR35. What is ir35? Well find out more at Gorilla
