If you contract through your own personal service company (PSC), you are considered as an employee. As a result, you are subject to the strict tax rules on travel deductions when claiming any expenses.
The first rule is that you can’t claim ordinary commuting costs. ‘Ordinary commuting’ is defined as the travel to and from a permanent workplace that’s attended regularly to perform your employment duties. The travel cost may be claimed for a location that you work at on a temporary basis, but this is subject to meeting the defining conditions of a ‘temporary workplace.’
A place is not classed as ‘temporary’ if the employee travels to the same place for more than 24 continuous months, or is expected to attend for longer than 24 months. For example, if your PSC starts a contract that’s expected to last 36 months in one place, you can’t claim the travel costs to and from that location because the contract states the workplace is permanent from the beginning of the contract.
Another definition of ‘temporary workplace’ is one that the employee goes to, to carry out a task which has a limited timescale, or for other short-term purposes. HMRC’s fundamental rule is that if a worker is present at a place for +40% of their working time, then it’s considered to be a permanent workplace – therefore the cost of travelling to this location can’t be claimed.
However, working at the offices of clients for maybe 15 hours per week out of a 40 hour normal working week will be viewed as temporary – this still applies even when the contract exceeds 24 months.
Please discuss your travel expense concerns with us before taking on any long-term contracts, as these conditions may determine whether it’s worthwhile for you to proceed with the contract.