What is the 24 Month Rule?

There are numerous rules and limitations when contracting. However, one of the more important rules all contractors need to be aware of is the “24 Month Rule” when claiming expenses.

What is the 24 month rule?

As a contractor, you are only permitted to claim travel expenses to the same location for no more than 24 months. Furthermore, once you know the contract will last for more than 24 months you must not claim any further travel expenses.

For example, if you start a contract that will last up to 24 months, you will be entitled to claim travel expenses for the full length of the contract. However, if you start a second contract after this (for the same client at the same location), if the two together exceeds the 24 month window, you will not be permitted to claim any travel expenses for any part of the second contract.

How to reset the rule?

In order to reset the rule your journey must change substantially. It is not simply enough to change the client, if the location of where you perform the services stays the same, or is in the same building, for example. In addition, it applies to the worker so operating in a different structure, such as a limited company or an umbrella company, will not effect it. 

Can I just take a small break?

In theory yes, though it would need to be for an extended amount of time, for the 24 month rule, not to apply. The start of the contract is taken into consideration and if the contractor has spent 40% of more of their time at the client’s location, the travel expenses cannot be claimed. The 40% also applies to when working at multiple locations. If you spend less than 40% of your contracted time at any location, the 24 month rule should not generally apply.

Does the 24 month rule effect your IR35 status?

No, it has no impact on the IR35 status. This is a common mis-understanding in the contactor market and although it could be argued that an extended contract could been seen as the existence of mutuality of obligations, it does not automatically place a contractor inside of IR35.
Claiming Back Travel Expenses - 24 Month Rule
Your travel expenses are part of the 24 month rule

Posted by David Crossley

Senior accountant and SME specialist