MilometryContracting: the travel rules that cost the most to get wrong
Site-based work, the 24-month clock, and why the first day of a contract can decide whether any of the travel is claimable.
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Contracting produces exactly the pattern the temporary workplace rules were written for, and exactly the ambiguity that makes them expensive.
The basic position
Which rules apply depends first on how you are engaged. If you work through your own limited company, you are its employee, and the employee rules below decide whether the company can pay your travel tax free. If you work through an umbrella company or an agency, the employee rules apply too, with an extra restriction covered further down. If you are self-employed and contract directly, a different test applies, also covered below.
Under the employee rules, travel to a temporary workplace is business travel. Travel to a permanent workplace is commuting and is not. Where the travel is business travel, the employer (your own company, if you have one) can pay you for it tax free up to the approved amount (for a car or van in 2026-27, 55p a mile for the first 10,000 business miles, then 25p), and if it pays less you can claim tax relief on the shortfall against your own Income Tax.
For a contractor working through their own company, outside IR35, and moving between client sites, most engagements start out looking temporary, which is why the travel is often tax free, and why it is worth understanding when that stops being true.
The 24-month rule, applied to a contract
A workplace ceases to be temporary once your work there runs, or can reasonably be expected to run, for more than 24 months, where attendance is for a significant part of your working time (HMRC treats 40% or more as significant).
The word that matters is expected.
- A twelve-month contract, expected to be twelve months: temporary. Travel claimable.
- A three-year contract, known on day one: permanent from day one. No claimable travel at all, not even for the first 24 months.
- A twelve-month contract extended twice, where at month 20 it becomes clear it will run past two years: travel stops being claimable from the moment the expectation changed, not at month 24.
That third case is the one that catches people, because nothing visible happens on the day the position changes.
A second rule matters for anyone taken on for a single project: a site is also permanent if you are expected to work there for all or almost all of the time you are likely to hold that job. For someone employed by their own company on an ongoing basis this rarely bites; for a fixed-term employee hired for one site, it usually does.
How the engagement shape changes the answer
These rows assume your own company, outside IR35, attending the client site for 40% or more of your working time unless stated.
| Engagement | Expected length | Temporary? | Travel claimable |
|---|---|---|---|
| 6-month contract | 6 months | Yes | Throughout |
| 12-month, extended to 18 | 18 months | Yes | Throughout |
| 12-month, extended to 30 at month 20 | Over 24 | Until month 20 | Up to the extension only |
| 36-month contract from the outset | 36 months | No | None |
| 30 months, one day a fortnight | Over 24, low attendance | Yes | Throughout |
Which route the claim takes
| Structure | Mechanism | Typical restriction |
|---|---|---|
| Own limited company, IR35 does not apply to the contract | Company reimburses at approved rates, tax free | The 24-month and fixed-term rules above |
| Own limited company, IR35 applies to the contract | Each engagement treated as a separate job | Home to that client is normally commuting (section 339A) |
| Umbrella or agency | Each engagement treated as a separate job, where you work under supervision, direction or control | Home to the client is normally commuting |
| Self-employed, direct | Deduct from profits: flat rate or actual costs | Wholly and exclusively test; depends where the business is based |
Umbrella, limited company, or agency payroll
Since April 2016, section 339A of ITEPA 2003 treats each engagement as a separate employment for travel purposes where you work through an intermediary. The client's site is then usually a permanent workplace for that engagement, so home to client is commuting. How that lands:
- Own limited company: the restriction applies to a contract where IR35 (the off-payroll working rules) applies. On a contract outside IR35, the ordinary employee rules above apply. Whether IR35 applies turns on whether you would be an employee of the client if you were engaged directly, judged on the contract and on how the work is actually done. For a medium or large client outside the public sector, and any public sector client, the client makes that decision; for a small private client, your company does. It is decided contract by contract, and it is the point in this post most likely to need a professional view.
- Umbrella or agency: the restriction applies unless it can be shown that nobody supervises, directs or controls how you do the work. HMRC's view is that many umbrella workers are in that position, so home-to-client travel is usually not relieved.
The underlying travel rules do not change. What changes is whether there is a route to claim through.
If you are self-employed
There is no 24-month rule for the self-employed. A journey is deductible from your profits if it is made wholly and exclusively for the business. Where your business is genuinely run from home and you move between client sites for temporary periods, travel from home to those sites is generally allowable. Where you travel regularly to the same place, so that it is in effect your place of business, the journey from home is treated like a commute. Keeping records or tools at home does not by itself make home the base. Which side of that line you are on is a question of fact.
The record is the defence
Contractor travel claims tend to attract questions, because the sums are larger and the temporary-workplace question is genuinely arguable. A contemporaneous journey log, recorded as you drive rather than reconstructed at year end, is the difference between a position and an assertion.
Record every journey, tag the client site as Business while it is genuinely temporary, and if a contract extends past the point where you expect to be there more than two years, change the tag from that date. The history stays, the claim adjusts, and the record shows exactly when your expectation changed and why.
That last part is worth more than it sounds. "I stopped claiming in month 20 because the second extension was signed" is a defensible story with a date attached.
Sources
- 490: Tax and National Insurance contributions for employee travel (HMRC)
- Employment Income Manual EIM32075: temporary workplace (HMRC)
- Employment Income Manual EIM32080: the 24-month rule (HMRC)
- Income Tax (Earnings and Pensions) Act 2003, section 339 (legislation.gov.uk)
- Income Tax (Earnings and Pensions) Act 2003, section 339A: intermediaries and supervision, direction or control (legislation.gov.uk)
- Employment Income Manual EIM32125: the fixed term appointment rule (HMRC)
- Travel and subsistence expenses for workers engaged through employment intermediaries from 6 April 2016 (HMRC)
- Employment Status Manual ESM5600: workers using their own personal service company (HMRC)
- Understanding off-payroll working (IR35) (HMRC)
- Business Income Manual BIM37605: travel from home to work (HMRC)
- Business Income Manual BIM37620: travel to and between sites (HMRC)
- Simplified expenses: vehicles (HMRC)
- Claim tax relief for your job expenses: vehicles you use for work (HMRC)
- How long to keep your records: employees and others filing a tax return (HMRC)
- How long to keep your records if you're self-employed (HMRC)
General information, not tax advice. Contractor travel is fact-sensitive and the umbrella position in particular has changed over time: take advice on your own arrangement.
