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24 Months Rule – Travel Expenses

Q. I have a question about the 24 months rule. I am in a contract where the end client is a bank in Frankfurt / Germany. My company is based in the UK and I live in London, where I have a home office. I usually travel to Germany for 3-4 days a week and stay there at a temporary accommodation. The remaining 1-2 days a week I either work from home or from a client’s branch office in London.

My travel expenses are: flights between London and Frankfurt, temporary accommodation near Frankfurt, trains between the Frankfurt airport and the temporary accommodation, trains between the temporary accommodation and the client’s office in Frankfurt, and public transport between my home office and the client’s office in London. Which of those I would no longer be able to claim as company’s expense when I extend the contract beyond 24 months?

In addition to travel I also claim incidental overnight expenses for each day of staying abroad. Is there any condition upon which I would no longer be able to claim incidental overnight expenses if I extend the contract beyond 24 months?

A. When considering if a deduction is permissible under s.338 ITEPA 2003 (the normal travel expenses rules), the likelihood is that such expenses would no longer be allowable. However, there are special rules for foreign travel that allow tax relief where such is denied by s.338 & where certain conditions are met.

The rules are described in Chapter 7 of booklet 490 (PDF) & allow a deduction from earnings where:

  • The employee is UK resident & carries out all/part of their duties abroad;
  • The duties can only be carried out abroad; and
  • The duties keep the employee abroad for 60 days or more

Tax relief is only given however if the cost is either borne by the employer or reimbursed by the employer.

Whilst actual travel costs may be allowable under the special rules, accommodation & subsistence costs are not. EIM34003 states that if accommodation or subsistence costs are not deductible under s.338 ITEPA 2003 then they are not allowable under s.370 ITEPA 2003 (special rules). The reasons for this can be found at EIM34040 but essentially s.370(4) ITEPA 2003 does not permit such.

Our 24 Month Rule guide can be found here.

By Contractor Doctor

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