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Umbrella Companies and Site Based Rules
As a contractor the basis on which you claim site based expenses such as travel to and from the work site, an overnight stay etc is that the site is your temporary place of work. The moment the site becomes your permanent place of work you can no longer claim business expenses associated with the workplace.One of the big benefits of taking contracting assignments is that you can claim business expenses on a Tax and National Insurance free basis. If you are not able to claim business expenses you could find that your net income drops by 10 – 20%. Therefore it is important to ensure that you can claim business expenses at all times. To do this you must comply with Site Based Rules.
What are Site Based Rules?
Site Based Rules outline the basis on which a site is considered to be temporary. To comply with Site Based Rules a contractor must:- Intend to undertake multiple contracts while freelancing in the UK
- Not spend, and not intend to spend, any more than 24 months on a single client site
So long as site based rules are complied with, valid related business expenses are allowable.
Undertaking multiple contracting assignments
To claim expenses related to a temporary work site, it must be your intention to undertake multiple contracts while freelancing in the UK. If you only intend to undertake a single assignment the HM Revenue and Customs will consider it to be your permanent place of work and will not allow you to claim business expenses associated with the contract.The 24 month rule
To comply with the 24 month rule you must not spend, and must not intend to spend, anymore than 24 months on a single client site. It is particularly important to ensure you comply with site based rules when agreeing contract extensions. The moment you agree a contract extension that takes you beyond 24 months at a single client site business expenses are no longer allowable. For example, where a contractor initially agrees an 18 month contract and then agrees a 12 month extension, the contractor is only allowed to claim business expenses for the first 18 months. Eligibility for expenses is lost the moment the contractor commits to go beyond 24 months in total rather than after 24 months.Where a contract requires you to work at a number of client sites in parallel, the HM Revenue and Customs may consider the sites to be a single place of work.
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