Travel Expenses – 24 month rule

Travel Expenses - 24 month ruleContractors/directors under their limited companies can claim travel expenses from their permanent place of work, their client’s site, a temporary workplace.

To claim these travel expenses, they must satisfy:

  • The ‘wholly, exclusively and necessarily in the performance of duties’ test
  • The 24-month rule
  • The 40% test

HMRC have strict guidance on temporary work place and the circumstances under which contractors/directors can claim travel expenses. A detailed guide from HMRC can be found here:

What is the ‘wholly, exclusively and necessarily…’ test?

It means that the travel cost must be for business purposes. Travel costs from your home office to the client site and back again are allowed.  There should be no duality of purpose in the travel expense claim. You cannot, for example, plan a trip to see family in a different part of the country and then pop in to see a client nearby, just to reclaim the travel costs.

What is the 24-month rule?

The 24-month rule allows travel expenses from your home office to your client’s site to be claimed as long as it is a ‘temporary workplace.’ For a temporary workplace, the following conditions must apply:

  1. The engagement period is less than 24 months
  2. The engagement period is unclear but assumed to be less than 24 months

The engagement period starts from the date you first travel to the client’s site until the end of the contract. All the travel expense is allowable as long as the contract remains under 24 months.  As soon as it becomes apparent that the contract will be renewed and will go over 24 months, then from that point, you will not be able to claim any further travel expenses.


  1. If the contract is a 6-month contract, all travel expenses are allowable.
  2. If this contract is renewed for 12 months, the contract is still within the 24-month rule, and so the travel expenses are still allowable.
  3. If, after 18 months, this contract is renewed again for another 12 months, then travel expenses are not allowable from that point. It is because you know from 18 months that you will be working for more than 24 months at the same client site.
  4. If instead of a 12-month contract, you only had a 5-month contract after 18 months, then all expenses are allowable up to the last minute of 24 months.

What is the 40% rule?

If after 24 months, you still have a contract with the same client and at the same place, then the 40% rule needs to be applied to carry on claiming expenses.

A contractor/director who spends no more than 40% of their time at a client’s site (approximately 2 out of 5 days a week), can continue to claim travel expenses.  However, if a contractor/director spends more than 40% of their time at the client’s site, then after 24-months or earlier (as described above), you can no longer claim travel expenses.

Resetting the 24-month rule

You may think taking a break in the contract will reset the 24-month rule. Unfortunately, this is not the case. HMRC does not specify a length in the break but taking into account the 24-month rule and the 40% rule, then a break of at least ten months or more needs to be made.

A significant change in location can reset the 24-month rule, even if the client is still the same. A change in client but the same location, on the other hand, would not be considered a new client site.

Our services for contractors: Tax Smart

Please contact Southside Accountants Wimbledon for your tax and accountancy needs.


Written by Nisha Patel – Chartered Certified Accountant and a Tax Expert.


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