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Advice on the 2 year rule

i am fairly new to contracting and i am contracting through an Umbrella company,  i began my current contract in Jan 2011 and this was my 1st contract position since leaving a perm job (with a different company - based in Liverpool actually)

the company i am contracting for has just extended my current contract (without a pay rise i might add - no pay rise at all since i started...) which means i will now exceed the 2 year 'temporary' workplace rule and thereby preventing me claiming back any further expenses

i am a bit confused tbh because i am now working from a different location (within London) and for a different department - albeit for the same underlying company - and i thought the 2 year rule would be reset every time i took a new position not just keep rolling in line with the original contract

surely lots of people have a contract which entails them moving depts etc within the same company - but they don't think of it as the same original contract? i don't understand the HMRC position here at all...

so i asked my umbrella company what if i was to get a different contract with a different company within London - would this then reset the 2 year rule? i was advised that it would not?!?

so what options are open to me now?

1. move my contract to a different umbrella company - would that benefit me? is that possible? would that reset the 2 year rule?
2. set up my own ltd company - would that benefit me? is that possible?

would that reset the 2 year rule? my weekly gross is only £950 so losing out on being able to claim back expenses is quite a big deal for me, any advice greatly appreciated


CUK Contractors Respond:
irst of all, start your own limited company, you will be better off in many ways.

HMRC's view would be that, permanent employees are free to move around different departments within a company, but not free to change company. So you need to change company to differentiate yourself from permanent (or non-temporary) employment.
Your umbrella company is wrong.

On your points:
1. move my contract to a different umbrella company - would that benefit me? is that possible? would that reset the 2 year rule?
2. set up my own ltd company - would that benefit me? is that possible?
would that reset the 2 year rule

Both of these wont help with the 2 year rule.


CUK Contractors Respond:
For starters, take a look here to see how to search the forum. You'll find most questions have been asked previously, so as long as you put a bit of effort in before asking a question, you're more likely to get a better response from the old hacks on here.

http://forums.contractoruk.com/welco...uk-forums.html

I'd also suggest you take a look at the chapters 3.12 and 4.6 in the HMRC guide on this topic:

http://www.hmrc.gov.uk/helpsheets/490.pdf

You'll see that unfortunately the rule is based on a geographical location, as opposed to each client, or whether you're working through a Ltd, etc.

Try a search on the forum first though...it's been covered before about people's opinions of how far away do you have be in London from your previous gig before you can 'reset' the travel rule.


ContractorUmbrella Responds:
The 24 month rule comes down to location - you could have 2 contracts for different companies in different areas of London which extend beyond 24 months together and you would still be caught.

Changing payment vehicle won't make any difference - maybe time to look around for another gig?


Contractor:
so in the short term there is nothing i can do?

long term i guess i need to find a different position that pays enough not to make a difference re: claiming expenses

i will always be working in the city of London or Canary Wharf as my expertise is for a financial services based companies


ContractorUmbrella Respond:
Unfortunately yes - as you will always be caught because of the area your skills are required a rate increase would be the way forward


CUK Contractors Respond:
If you look at the example scenarios in the HMRC link I sent you, there is one in there that specifically talks about a person who works for different clients but all within the Square Mile area of London...sounds very similar to you but take a look for yourself and see.


CUK Contractors Respond:
the company i am contracting for has just extended my current contract (without a pay rise i might add - no pay rise at all since i started...) which means i will now exceed the 2 year 'temporary' workplace rule and thereby preventing me claiming back any further expenses
You are a contractor now. You do not get 'pay rises'. You negotiate a hike in your rate if you can prove you have added extra value but expecting a pay rise just because you get an extension is permie mentality.


CUK Contractors Respond:
From this one: http://www.hmrc.gov.uk/helpsheets/490.pdf

Example:
Eloise, a computer consultant, is the only employee of a company which she controls. She is a specialist in banking systems. She spends 18 months working full-time at the headquarters of a merchant bank in Lombard Street in the City of London. She then moves next door to design a new computer system for a different bank where she expects to stay working full-time for 22 months.
After that assignment she moves to work at a bank close by on Cheapside for 17 months. Eloise is not entitled to tax relief for her travel from home to these workplaces, because the nature of her work is such that she expects to work continuously in the 'Square Mile' albeit on the premises of different banks. So her travel from home to work will be broadly the same every day, year in year out (see paragraph 4.6).

So how do they define 'Square Mile'? Does that mean literally a square mile? Sounds a bit arbitrary to me.

However, there are banks in other places, for instance the bank of america is in croydon.


ContractorUmbrella Respond:
The actual word within the 24 month rule is "significant" - unless the journey distance and time is "significantly" different the 24 month rule will apply - the square mile is just an illustrative example


CUK Contractors Respond:
And just to be pedantic (who, me? ) the Square Mile is shorthand for the London financial district, which is pretty much the whole of the original City of london.


ContractorUmbrella Responds:
Yes and it was being used as an illustrative example


CUK Contractors Respond:
Important. If you have a contract through a brolly and it turns out to be the ONLY contract you have through that brolly, you might find that ALL T&S expenses will be not claimable, as HMRC will view that as a permanent position.

I.e. if you work through a brolly (or a ltd co.) make sure you do at least two contracts before changing vehicle.


ContractorUmbrella Responds:
It could cover the whole of London - you could have one contract on one side and another on the other side but your journey time to both is an hour and the distance is similar then the 24 month rule will apply.

With regard to moving house - really????? Just to avoid the 24 month rule????