Contractors' Questions: Can I claim if a short gig ends up lasting 25 months?

Contractor's Question: I'm confused about the implications for expenses under the 24-month rule where there is succession of temporary workplaces, as opposed to a temporary absence from a permanent workplace. Can you please advise in circumstances where, due to the nature of the work, how long I expect to be at the workplace may be open to change?

Expert's Answer: The expense rules that were introduced on 6 April 1998 aim to grant (with certain restrictions) home-to-work travel expenses for those workers who, within their employment, work at a succession of temporary workplaces.

A temporary workplace is a workplace where attendance is to perform a task of limited duration or some other temporary purpose. The test for performing a task of limited duration is passed if the attendance is for a period of limited duration even though the task itself may not be of limited duration. For example – on the assumption that it never ends, painting the Forth Bridge is not a task of limited duration, but if a painter is sent there for a few months then he/she is performing a task of limited duration.

The-then Inland Revenue (now HM Revenue & Customs) could not allow unrestricted relief. There had to be some restrictions, one of which is that attendance at the workplace must not exceed, or be likely to exceed, 24 months. If attendance at a workplace is to perform a task of limited duration lasting 36 months, that workplace passes the basic definition of temporary workplace. But because the attendance will be for a period of more than 24 months, the workplace is not regarded as being temporary – in other words it is a permanent workplace.

In 1996 and 1997, when the draft legislation was going through its consultation process, one of the main concerns of employers was that they needed to have certainty at the time travel expenses are paid to the employee. Because of that there is built into the legislation likelihood, expectation and reasonable assumption. It follows, therefore, that the 24-month rule is not applied in retrospect but based on the facts at the time the expense is incurred.

If a person knows from the outset that the attendance at the workplace will be for more than 24 months, no allowance will be due - but the same applies if it is likely, or if it is reasonable to assume, that their attendance will exceed 24 months.

If an employee expects to be at a workplace for 12 months and after 6 months the expectation changes to 26 months, then the claim will fail as from the 6 month date. If an employee expects to be at a workplace for 26 months and after 6 months that expectation becomes 12 months, the claim will pass as from the 6-month date.

Problems arise when a person returns to a workplace previously attended. It is a bit like a restricted parking spot – like 1 hour and no return within 30 minutes. Let's restrict ourselves to two workplaces – A and B and consider the following scenarios:

o A 6 months, then B 6 months then A 6 months. Total period 18 months. Neither A nor B exceed 24 months therefore allowable

o A 6 months, then B 12 months then A 6 months. Total period 24 months - again neither A nor B exceed 24 months therefore allowable.

o A 12 months, then B 9 months then A 6 months. Total period now 27 months. The first spell at A is allowable – the spell at B is allowable, but when we look at the second spell at A we have a problem.

Although the aggregate attendance at A is not for more than 24 months, the attendance at A is in the course of a period lasting more than 24 months. When the employee returned to A it was expected to be for a period of 6 months –and this takes the period at A over the 24 month limit. The law states that where the period is a "continuous" period, the claim will fail. So is this period of 24 months a continuous period? Don't take the word "continuous" literally – there is a legal definition which overrules any dictionary definition. A period is a continuous period if the employee spends a significant amount of time at the workplace. The rule of thumb is that a significant amount of time is more than 40% of the working time, so let's go back to this example and look at the situation on the day the employee returned to A. In the 24 months from commencement there was 12 months actual attendance at A, followed by 3 months of the expected 6 months. That is 15 months out of 24 months – (equating to 62.5%) therefore the second spell at A fails as the attendance is in the course of a continuous period lasting more than 24 months.

The expert was Bob, the retired tax inspector. 

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