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The Myth of the 24 Month Rule

The “24 month rule” is often a cause of confusion within the contracting industry. Many contractors can misinterpret this as a restriction upon the length of an engagement, however this is simply not the case.

The 24 month rule relates to ‘travel and subsistence’ – the expenses claimed in relation to travel costs such as train tickets and other expenses relating to food or accommodation.

Such expenses cannot be claimed for where an engagement exceeds, or is likely to exceed, 24 months AND where the contractor spends or is likely to spend more than 40% of their time at the workplace.

You can also not claim these expenses if you are operating as inside of IR35.

The 24 month rule does not, however, have any bearing in terms of determining your IR35 status and many contractors provide services that far exceed that time scale.

Whilst the length of an engagement will have little bearing from an IR35 perspective, it is important to note that the longer an engagement is, the higher the potential liability will be should you be caught by IR35.

The length of engagement can also have an impact on other factors. HMRC’s manuals state:

“The length of engagement is neutral in determining the employment status. However, in general, the longer the engagement the more likely that it will be a contract of service and the shorter the engagement the less likely. This is not down to the length of the contract itself, but because the other factors are more likely to indicate this to be the case.” ESM0548

The ‘other factors’ referred to above namely relate to the contractor falling ‘part and parcel’ of the client’s workforce. It is commonly considered that, the longer the contract, the more likely it is that a contractor will become integrated into the engager’s organisation.

“For example, the longer the engagement the more likely that the engager will want to, or need to, exert significant amounts of control over the worker, a significant pointer towards a contract of service.” ESM0548

To conclude, there is not a ‘cap’ on the length of time a contractor can engage with an end client. It is important however, for a contractor to consider their IR35 status on an ongoing basis; ensuring that your contract terms and conditions and your working practices remain as outside of IR35, or paying the relevant taxes should you be determined inside IR35.

This can be achieved by having regular contract reviews undertaken by an IR35 specialist such as Qdos.

This article was written by Becci Walker, Senior Employment Status Consultant at Qdos Contractor – leading IR35 advisory and contractor insurance specialist. Find out more about the 24 month rule.

By Qdos Contractor

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3 thoughts on “The Myth of the 24 Month Rule”

  1. Joe

    Doesn’t matter what you do, HMRC is always coming after you for money. The future is very bleak for people trying to make a living by working for themselves. The endgame for HM government is to have all our earnings paid directly to them, they will then issue you some money back to live on. You will literally be in chains but they will try to make you feel like you are happy by ensuring you are entertained (with what they want you to see) and give you a false sense of worth. If you ever feel like you are getting ahead in life, don’t worry, HMRC will come knocking and will take it from you.

  2. John

    Joe – all true. I stopped playing their stupid games, got so fed up with it. Now I take salary up to tax threshold, pay 40k into pension and take rest of year off. I pay no tax now. They have taken the micky for too long now. People need to walk away as much as possible.

  3. Jamie

    I seem to be unable to get to the bottom of the 40% rule; 40% of what?!

    – 40% of my time I have been contracting?
    – 40% of my time in the last 24m period
    – 40% of my last working week, month …..?

    Clearly that all have very different answers!

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