If you work in oil and gas or renewable energy, there is a good chance you will spend a lot of time working away from home.
That might mean travelling long distances each day or, quite commonly, renting somewhere temporarily because commuting every day simply is not doable.
Unfortunately, travel and accommodation costs are also an area where I often see contractors receive the wrong advice. Sometimes they can be claimed, and sometimes they cannot. The answer depends on your specific circumstances, and those circumstances needs to be understood properly before anyone can give you a confident answer.
Do not assume the answer is obvious
One of the biggest mistakes I see is that people treat travel and accommodation as though there is a simple yes or no answer, because there usually is not.
For example, if you rent a flat near a project site during the working week, is that allowable? Possibly. If you stay in a hotel near the same site, is that allowable? Possibly. If you drive hundreds of miles to a project and back, can you claim the mileage? Yes, you guessed it, possibly.
That might sound unhelpful, but I’m being honest. The tax treatment depends on several factors: where is the workplace? How long are you expected to be there? Is it temporary? What does your contract say? Are you working through a limited company? Are you under supervision, direction or control? Are you paying the costs personally or through the company?
Temporary does not just mean “not forever”
A lot of contractors describe a project as “temporary” because they know it will end at some point. Although that may be true, the tax rules are more specific than that.
A project that lasts a few weeks is clearly different from a project expected to run for several years. A site you visit once a month is different from somewhere you attend several times a week. A workplace can also become permanent for tax purposes, even if you still think of it as a “temporary” contract site.
Accommodation is a common problem area
Accommodation is one of the areas where poor advice can be very expensive.
I recently wrote about a contractor who was told her accommodation costs were not tax deductible, when the temporary workplace rules needed to be considered properly. You can read the full case study here: A potential £8,500 mistake when working away from home.
Some contractors are told that rent near a project site is never allowable. Others assume that if a hotel would be allowable, a rented flat must be allowable too.
The key point is that your accountant should understand why the accommodation is needed, how it relates to the project, how long you expect to need it, and whether there is any personal element to the arrangement. It is much easier to deal with this properly at the start than trying to justify it later.
Keep evidence while the project is happening
If you are working away from home, keep clear records as you go. That might include:
- the project location
- the start date and expected end date
- contract extensions
- days worked on site
- mileage records
- fuel, train, parking, or toll receipts
- hotel or rent invoices
- notes explaining why staying away was necessary
Keeping these records may feel like an unnecessary faff, but if HMRC ever asks questions, clear records will make your life so much easier.
Speak to your accountant before the arrangement changes
If a three-month project becomes a twelve-month project, tell your accountant. If the site location changes, tell your accountant. If you move from hotels to rented accommodation, tell your accountant.
If anything changes:
Tell.
Your.
Accountant.
The main point
Working away from home is normal for many contractors. But normal does not mean simple. Getting the tax treatment wrong can mean either missing out on relief you are entitled to, or claiming costs that should not have been claimed. Neither is good.
So, if you are about to start a project away from home, or your current arrangement has changed, speak to your accountant immediately.
Get in touch
If you work in oil and gas or renewable energy and you are unsure whether your travel or accommodation costs are being handled correctly, it may be worth having a quick chat.
Feel free to give me a call on 07866 465 223 or email martin@mcaccounting.co.uk if you’d like my help.