Q. I am looking at some clarification regarding the 40% rule – if a contractor spends over 40% of their working time within 24 months at a particular workplace, that workplace will be considered permanent.
What’s working time and non-working time? For example: If I am required to travel abroad to a temporary workplace for 3 days to work 8 hours a day, is the whole travel a working time or just the paid-for 3×8 hours?
Similarly, I might spend 10-20 hours a week on work that’s not directly being paid by clients – looking for new contracts, talking to potential clients, filling in accounts, dealing with HMRC requirements, work on my company’s website, etc. Since that work is mostly done at my permanent workplace (e.g. home), it directly affects the 40% rule, i.e. my total working time would be a sum of paid and non-paid working time, or a sum of time spend at the temporary (client’s premises) and permanent (home) workplace.
So, how to apply the 40% rule correctly?
A. A permanent workplace is one where a worker spends or is capable of spending more than 24 months & 40% or more of their working time at that particular work site. It is important to remember that both legs of the test must be met for there to exist a permanent workplace.
HMRC’s guidance contained in booklet 490, ‘Employee Travel’, does not define “working time” but from the examples given within that publication, it refers to time in more broad terms rather than specific hours, ie days, months etc.
Time not spent working on the contract will, by definition, not be “working time”.
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