Temporary workers who intend to complete two or more assignments during their employment are able to claim the cost of their travel to and from work and a scale rate subsistence as tax deductible expenses, but what are the limitations of this?
24 Month Rule
There is often confusion over HMRC’s rules regarding a ‘temporary’ workplace. The statutory definition of a temporary workplace indicates that ‘limited duration’ is 24 months, any contract that is extended over this amount of time on the same work site is then considered ordinary commuting and thus the expenses become subject to full PAYE and NICs.
Some temporary workers may find themselves moving between a succession of sites each week so how does the ’24 month rule’ affect them? If the different sites are visited following a regular pattern, for example they were at the same site each Monday, the same site each Tuesday and so on, HMRC states that when the contract extends beyond 24 months the same rules apply and it will be considered ordinary commuting.
Work defined by a Geographical Area
Some temporary workers do not have a single site as a regular workplace but they have a job where their duties are defined by reference to a particular geographical area. For these workers, the 24 month rule will apply if they continue to work within the same geographical area.
If you continue to travel to the same worksite/s or geographical area for more than 24 months then you will no longer be entitled to claim travel and subsistence as tax deductible expenses. However if your regular site changes during your temporary employment, then the 24 month rule is reset!
A look into the future….
The Office of Tax Simplification (OTS) issued their second report in January 2014, which details a comprehensive review of employee expenses and benefits. Chapter 6 of the report sets out some specific concerns and suggested changes surrounding travel and subsistence expenses. A consultation was published on 18th June by HMRC to explore the findings of the reports further and this is due to end on 9th September.
We continue to review legislative developments in our industry to ensure we are always thinking and planning ahead. The OTS report and recent HMRC consultations as a result are an example of where further changes are inevitable. There may well be an update in the autumn statement in December 2014 – we will obviously keep you updated with any changes that may affect temporary workers and their entitlements.