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IR35 – Travel and Subsistence Expenses

Q. Having completed the dreaded online HMRC IR35 test my result was inconclusive. Having completed the test a number of times it would seem to be that the inconclusive result hinges on a single question namely “What does the worker have to provide for this engagement that they can’t claim as an expense from the end client or an agency?” My query is in relation to the following option – “Other expenses – including significant travel or accommodation costs (for work, not commuting) or paying for a business premises outside of the worker’s home.”

My business address is at my home address. Each week I travel to London from Bristol for 3 days to attend meetings it is only one trip per week – not a commute. Ticking the ‘Other expenses” option above returns an inconclusive HMRC result so I’m unsure as to how to proceed. Also my accountant has stated that from 06th April 2017 you cannot claim for travel and subsistence that relates to travelling from home to work, i.e. ordinary commuting. This is regardless of the 24 month/40% rule. However I would argue that a commute is daily travel. Is he correct?

A. If you are travelling once a week from Bristol to London (return) for work purposes and the cost of this amounts to a couple of hundred pounds a month then it can be argued that this constitutes a significant expense (there is no official guidance on what would constitute “significant”) and you would be able to tick that box, which would then lead to a inconclusive result.

It’s difficult to say precisely why you’ve landed on that point, but generally speaking an inconclusive result would indicate that there are potential IR35 related issues earlier in the Employment Status Service Tool’s process which causes doubt. It would likely be worth your while getting in touch with us on 0116 2690992 so we can talk through your specific circumstances to try and get to the bottom of your result.

As another point in respects to the ordinary home to work commuting, you are still able to claim for this after 6th April 2016, but it is tied into your IR35 status for Ltd contractors. If you are determined to be inside of IR35 you cannot claim travel and subsistence expenses for home to work commuting. If you’re outside of IR35 you can continue to claim expenses as you have always done.

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By Qdos Contractor

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9 thoughts on “IR35 – Travel and Subsistence Expenses”

  1. Phil Wade

    Where you choose to live in respect to your place of work is a personal choice, so the fact that you live in Bristol and choose to work in London then the subsequent expense is for you to absorb as it can not be considered to be work related. Travel expenses incurred in the course of your work i.e. your “employer” sends you Norwich from their London base and you have to pick up the tab, then that’s an expense that can be claimed. There are lots of people who work in London but have a long commute by train costing thousands per year; however their London salaries will reflect this and they do not expect to also get a tax break in relation to it. No doubt your contracting rate will also reflect the higher cost of working in London. Unfortunately these IR35 issues all stem from overpaid ill advised high profile personalities not shelling out their NI and taking a disproportionate amount in dividends (even though they will still pay personal tax on dividends and CT on their Ltd Co. profits) or off-shoring their bank accounts, now we all suffer from their greed.

    • Andy

      I have a similar issue
      I’m based in Belfast and was considering a contract in Dublin which would require a few nights over in a hotel
      and 2 or 3 commutes per week
      Now the rate is 400 euro a day which is lays say £350.
      The Irish companies insist that you need to go through an umbrella company in Dublin which pretty much takes out almost 50% of the daily rate
      So all that tax minus a thousAnd a month for hotels and travel means you bring home about 35 to 40% of what you earn
      It’s really not worth contracting anymore. Perhaps the government will ralise at some point that there are no temp IT workers available to companies for short term work due to their greed.

      • Dale

        Is it possible to considered living in Dublin and working under a ROI company paying taxes there instead of UK and commuting home for the weekend ? that’s only 100 days per week in the UK and a couple of long family holidays should cover any UK residency issues?

    • Mark

      Rgardless of the political diatribe above, the ability to claim travel expenses depends entirely on your IR35 status. If you are outside IR35 and your home is also your place of work then nothing has changed regarding travel costs.

      Contractors on the whole do not “choose” to work miles away from base, we work where we can find suitable work. Sometimes that may be round the corner and sometimes it may be a considerable distance away. The daily one charges is generally based on market rate for the skills required and not based on distance!

      • The Q

        > Contractors on the whole do not “choose” to work miles
        > away from base, we work where we can find suitable
        > work. Sometimes that may be round the corner and
        > sometimes it may be a considerable distance away.
        > The daily one charges is generally based on market
        > rate for the skills required and not based on distance!

        I budget for a minimum weekly take AFTER “logistics” costs, wherever the client site may be wrt my home. If the sums don’t add up, then I don’t take the gig. What is “market” rate has nothing to do with it.

    • Derek Watkinson

      Sometimes contract work is not as simple as portrayed by Phil Wade e.g. when the work itself is at a significant number of different sites belonging to the client’s customer (e.g. when the customer is government organisation), the customer sites you will get assigned to is an unknown, the client limits what can be claimed for and direction from home matters with regard to what costs will be incurred.

  2. Jane

    Where I choose to work is a matter of personal choice.
    I don’t have any choice on where my home is because it is already there. I am not going to or cannot change it for each contract. Contracts are, by nature, short.
    So, if my day rate is 500 outside, my day rate inside is 1,000. This is a discounted rate because inside is public sector so I give an extra discount because I care about my community and my country.
    Before you ask, yes, I have lots of opportunities, lots of options. I have had no shortage of work so far.

    • Pash

      Hi,
      I don’t understand what you mean by inside and outside rates. Can you please clarity.
      Also the rate one would ask for depends on skills sets required, scarity of resource, own track record, etc…

  3. Pash

    My understanding is that if your office is based at home, i.e. you have a home office, then your home to office commute is a few steps i.e. from bedroom to office type of thing.
    If you then have a contract, the contract lets say is with ADB, then it is between ADB and your own company. Your company chooses (as its own legal entity) to employ you as the contractor to perform against that contract. The day rate charged is paid to your company by ADB into your company bank account and not to your personal account.
    Therefore this issue of being able to claim travel costs between lets say Bristol and London, is really expenses incurred by your company to delivery work against the contract with ADB, which means these travel costs should be able to claimed as legitimate expenses incurred in the line of work against this contract.
    One assumption for this is that it is a time limited contract based on day rates and not a fixed term contract attracting or offering an annual salary. I think the above would be quite different for you if you were to have a fixed duration annual salary paid into your personal bank account type of contract, although I am not legally qualified to say and you would have to seek independent qualified advice.
    IR35 status i.e. to be out of it, you have to demonstrate that as the contractor, you are not taking direct instructions to be able to perform your work (you are not directed by a line manager); your own company through whom the contract is being executed has the right and ability to substitute you with another worker under the contract; the contract is for a limited time and does not exceed two years.
    There might be a few more but these are the main areas. One more thing, you need to check that the contract being issued to you (your company) is consistent throughout. If there are any inconsistencies e.g. if it says payment within 60 days in one of the clauses but 45 days in the schedule, this would indicate the contract has been bought off the shelf and the only thing that is particular to you (your company) is the bit at the front detailing you/your company and the schedule at the end. If this is the case it would give ammunition to the HMRC to (want to) challenge it.

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