What costs are you allowed to claim for as a limited company, and what are the rules?

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Trading as a limited company is a great idea for many; it’s the best way to ensure that you are making the most of your business and your talents. But there can be pitfalls and confusion associated with starting a limited company (or even with a well-established one) that an accountant will be able to help you with. That’s why it’s always a good idea to ensure that you have an accountant on hand to help you out when you have a query about something that could be extremely important.

One of the areas in which people do get confused is travel costs.

What costs are you allowed to claim for as a limited company, and what are the rules?

The ‘main’ rule, the one that is the most important to remember, is the ’24 month rule’. This rule states that, as long as you are working in a particular location for less than 24 months, it will be considered a temporary workplace. And if you are working in a temporary workplace then you can claim for travel expenses to and from that place. This changes when you sign a contract that shows you will be in that location for 24 months or more – it is no longer considered a temporary workplace, and you cannot claim for any travel expenses. An example of this would be if you sign an initial contract for 12 months, but then, after nine months you sign an extension for another 18 months, your location changes from temporary to permanent when you sign that extension. However, you can claim up until that point, so you can claim for the nine months before you signed the extension.

There is another rule that also needs to be examined. It is known as the 40% rule. This comes into play even if you are in a permanent workplace and breach the 24 month rule as long as the location you are working in represents less than 40% of your total business working time. If you are there less than 40% of your working time then it is seen as a temporary workplace, even if you have a contract to be there for 24 months or more.

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