As a contractor, your client may require you to travel as part of your contract duties, whether it involves a quick meeting on the other side of London or a week-long international trip.
Can I reclaim the costs of travelling to my client’s regular workplace?
The costs of travelling to a permanent workplace are not an allowable business expense. However, if the workplace is considered ‘temporary’ for tax purposes, contractors can legitimately claim travel costs.
A temporary workplace is somewhere you attend to perform a task of limited duration, or for a temporary purpose, and which does not form part of your permanent workplace.
Most will meet the criteria for temporary workplace attendance. To do so, workplace attendance is expected to be no longer than 24 months.
If a contractor works at more than one location at any one time, it is advisable to seek professional advice on whether travel costs can be claimed.
It’s also important to be aware of the 40% rule. A workplace is considered permanent if you spend 40% or more of your working time there for more than 24 months. For full details on these rules, see our comprehensive guide to the 24-month rule.
Ordinary commuting between home and a permanent workplace is never an allowable expense, even if the journey is long or irregular.
Importantly, new rules came into force in April 2016 to remove the ability to claim tax deductions for travel expenses for contractors operating their companies within IR35. These rules apply where the engagement is treated as employment for tax purposes, including where the off-payroll working rules apply.
Can I reclaim all business travel costs?
Most costs incurred when attending a temporary workplace are allowable.
Costs that can be claimed include:
- Train and tube fares
- Mileage allowances
- Car parking
- Tolls
- Taxis
- Flights
When a journey includes both business and personal elements (i.e. a dual purpose), only the business portion of the cost can be claimed.
For contractors who drive to a client site, claiming a mileage allowance from their company is usually the most tax-efficient option.
For each of the first 10,000 business miles per tax year, contractors can claim a 45p reimbursement. The rate reduces to 25p thereafter. See the official HMRC rates here.
Contractors claiming the mileage allowance will pay for the personal costs of running their car; therefore, fuel, servicing, insurance, and road tax should not be claimed from the company.
Most contractors will also be able to claim the reasonable costs of their subsistence whilst attending a temporary workplace too.
Subsistence costs are only allowable where there is a qualifying business journey to a temporary workplace. Routine meals taken during a normal working day are not allowable.
What about the costs of accommodation when I’m away from home?
If you are required to work away from home, the reasonable costs of overnight accommodation are allowable.
This can include hotel costs or, if appropriate, the cost of renting suitable accommodation, such as a flat near the client site.
HMRC expects accommodation costs to be reasonable for the assignment’s location and duration, and excessive or luxury accommodation may be challenged.
What are Incidental Overnight Expenses Allowances?
When you are working away from home, HMRC allow a fixed rate claim of £5 per night to cover ‘incidental expenses’ such as laundry and telephone calls home.
The rate rises to £10 per night if you are working overseas, so it’s important to make full use of these allowances as they can quickly add up over the space of a year.
Can I reclaim the costs of meals, etc. while staying overnight on client business?
Yes, a claim can be made for the actual costs incurred, provided they are considered ‘reasonable’.
HMRC does not permit round-sum or benchmark meal claims unless you are using an approved scale rate scheme.
What records should I keep?
It’s essential to maintain proper documentation to support your expense claims in case of HMRC enquiries.
Keep receipts for all expenses and maintain a record of business trips, including the dates, destinations, and purposes of travel.
You should retain all of your records for at least six years.
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