The 24 Month Rule for Contractor Expenses

Contracting is a great way of life and for many people, it’s a way to combine the freedom of self-employment and the security of a regular job. But, to avoid any unfair tax avoidance, HMRC has been cracking down on so-called ‘disguised employment’ for many years.

What is disguised employment?

A disguised employee is someone who, if they were not a contractor, would otherwise be an employee of the client that they work for. By working as contractor rather than as an employee:

  • The business avoids paying employer’s National Insurance
  • The worker can operate as a more tax-efficient limited company, rather than paying income tax and NI as an employee.

As a consequence, IR35 rules were introduced to remove the tax benefits of disguised employment. These changes mean it is important for contractors to make sure that the work they do doesn’t look like disguised employment. One of the things they need to be aware of is the 24-month rule.

What is the 24-month rule for contractors?

The 24-month rule is a way for HMRC to restrict the time over which contractors can claim for travel and expenses to their client’s place of business. In short, contractors can only claim travel expenses from where they live to their client’s premises if it’s a ‘temporary workplace’. And that’s where 24 months comes in.

Contractors and their place of work

Most contractors, whether they are working in their own Limited Company or under an umbrella company, will have their permanent place of work as their home address. It’s also possible that you would use the address of the umbrella company, or have your own office or coworking space as a permanent place of work.

In many cases, the contractor could indeed work from these places for the vast majority of the time, and only occasionally visit client offices as required.


For example:

Imagine a computer coder who does their work using their own systems at their home office, and visits the client’s site once a month for a project meeting. In this case, the 24-month rule is unlikely to cause any problems (see the 40% rule below).


But in some cases, contractors are offered work on the basis that they must be at the client’s place of business every day. It’s in these cases where the 24-month rule could prove to be an issue.

How travel expenses work for regular employees

Employees of any business are entitled to claim reasonable expenses for travelling to and from their permanent place of work to a temporary workplace.

A good example of this would be where an accountant works in an office, but needs to go out to meetings at a client’s premises or travels to conduct an audit.

The office is the permanent place of work and the client’s premises is just a temporary workplace. They can claim expenses for those travel costs, but they are not entitled to claim if they travel from home to their permanent place of work, as this is seen as a private journey.

But what happens for contractors?

This is an issue that has been around for many years for contractors and is likely to become a much hotter topic as the world of work changes due to more remote and hybrid working.

HMRC allows contractors to claim the cost of travelling to a temporary place of work, just like regular employees. So, when they are travelling from their permanent place of work (their home or registered office address) to a temporary workplace (the client’s premises) they can claim the cost of the journey.


This might include:

The cost of public transport such train tickets, underground trips, bus tickets, and ferry journeys. Car mileage is also allowable, as are road tolls, parking, and if you’re in London, Ultra Low Emission Zone (ULEZ) fees. Taxi fares are also fine, as are airfares and associated airport transfers.


If the contractor was classed as an employee, they wouldn’t be able to claim those expenses (without it simply being a perk of the job, in which case they would need to pay tax on it). And, if the contractor is doing that every day for a long time, can it really be classed as a temporary workplace? To cut down on contractors claiming unfairly for travel expenses, the 24-month rule was introduced.

Understanding the 24-month rule

There are two things that we need to bear in mind when we are looking at the 24-month rule.

  • The period of work
  • The amount of time spent at a temporary location (covered in the next section).

A contractor can’t claim travel expenses to a temporary location if the period they work there is 24 months or more.

But there are two points to bear in mind here. The first is that this is a rolling period. So essentially, there is no ‘clock stopping’ point, such as if you leave a workplace for a period of time.

The second point is that this is based on expectation. That is, how long do you expect to work there? This one catches a lot of people out.

For example, a contractor who agrees to a contract of 6 months is absolutely fine. But a contractor who agrees to a 30-month contract would not be able to claim any travel expenses for the duration of the contract.

This is because the place of work can’t be classed as temporary if it is expected to be more than 24 months in duration.

Let’s look at two examples of the 24-month rule in operation

Example one

  • In example 1 we have a contractor who signs up for a 6-month contract. They can claim expenses for the first six months.
  • They then get a 12-month contract extension, and they can claim for this period too. This is because the initial 6-month period, plus the 12-month extension adds up to 18 months. They’re under the 24-month rule.
  • Then they sign up for another 12-month contract. They’re now disallowed from claiming because the expectation is that this will take them over the 24-month time limit. They won’t be able to claim expenses for any of the second 12-month extension.

Example two

  • In the second example a contractor signs up for a 30-month contract and they are barred from claiming any travel expenses. However, the contract ends after 18 months.
  • In this instance, the contractor still can’t claim the expenses because the expectation was that they would go over the 24-month time limit, even if, in practice, they did not.

So, you can see that the expectation of the use of a temporary workplace is more important than the actual use for the purposes of expenses.


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What the 40% rule means

A workplace is classed as a temporary workplace if the contractor spends less than 40% of their time there. This is helpful if, as much of the population is, they are working from home most of the time.

For instance, where a contractor works for 4 days a week at home and only goes into the client’s office one day a week. This is also the case where a contractor works for more than one client, each for less than 40% of the time.

Note that this is also a rolling, cumulative amount. A contractor could work five days a week for the first week of the month at one client, then five for another and so on. They still wouldn’t breach the 40% rule.

The 40% rule is an important one because it takes precedence over the 24-month rule. If you don’t work more than 40% of your time in one place then the 24-month rule becomes irrelevant.

HMRC’s definition of a ‘place’

As you would expect when you’re dealing with HMRC, there is another thing that you need to be aware of, and that is the classification of a ‘place’. As far as HMRC are concerned the place is not the premises of a particular client but the journey you take to get there. If that journey is substantially the same, then it is classed as the same place.

Taking another example, imagine a contractor who works in compliance for banks. They have five clients in the City of London, and they visit each of them once a week.

To any normal person, this would seem to be a contractor visiting different temporary workplaces but to HMRC, because they are taking the same journey, which costs the same amount of money every day, they breach the 40% rule. The fact that they are different clients is irrelevant.

The 24-month rule FAQs


What happens when I change location but still work for the same client?

This is fine, as long as the expectation is that you won’t be there for more than 24-months and the journey is substantially different.

If I return to a workplace where I have previously worked within the last 24 months, what happens?

Then you have to make sure you comply with the 40% rule. If not, then the 24-month rule applies.

Can I take a break to reset the 24-month rule?

There isn’t any clock reset process as everything is assessed on a rolling basis. However, the bigger break you take then the closer to the 40% rule you get.

What does it mean for my IR35 status?

Although the 24-month rule doesn’t form an official part of the assessment of your IR35 status, you can bet that any HMRC inspector will consider the time you spend travelling to a single office. They apply the principle that if it looks like employment, it probably is.

Is there a way I can get around it?

You can’t and we wouldn’t suggest you try. HMRC are very hot on contractors who try to break the rules! Remember the 40% rule and also bear in mind that the 24-month rule is based on expectation and not actuality.

Can I combine a private trip with my expenses?

No. The travel must be for wholly business purposes.

What can I claim as travel expenses?
  • The costs of public transport such as train, underground, tram, coach, bus, and ferry journeys
  • Mileage for car journeys, ULEZ charges, tolls, and parking
  • Taxi fares
  • Airfares


I’ve been given a 36-month contract, can I claim for the first 24 months?

No, because the expectation is that you will breach the 24-month rule right from the start.

I’ve won a contract in the same building with another company. Does the clock reset?

No. HMRC see this as being the same place. The rules are based on the journey you take, not the company you work for.

Learn more about Pandle’s timesaving bookkeeping features for contractors, freelancers, and small businesses.

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible.

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