Freelancer's Questions – Does long term work for a client affect my freelance status?

Question: I work in the TV industry and last October completed 19 months (successive contracts) with the same company. They have now offered me up to 40 weeks work this year. Would accepting more work from the same company affect my freelance status with the Inland Revenue?

Answer: Norla Services Limited

It is assumed that you have considered the implications of IR35 and that your relationship with your client is not one of employer and employee, and as such is not at risk of challenge by the Inland Revenue.

If that is the case, the main issue that you will need to take into consideration is the “24 month rule”. The Inland Revenue allow a place of work to be considered “temporary” if it is not deemed to be your “usual” place of work. In practice, this allows contractors to claim expenses which would otherwise not be allowable, such as subsistence, overnight accommodation and home to site travel.

A temporary work site automatically becomes your usual place of work once the 24 month rule has been breached. The difficulty is that the rule is broken as soon as you know that your contract will last for at least 24 months. It is therefore possible for the rule to be broken very early on in a relationship. For example, if you had a 6 month contract with a client, and then accepted a new 2 year contract, the rule is breached as soon as the second contract is signed.

Therefore, in your example, as soon as you accept the new contract, you would not be able to claim most of your expenses. This should be taken into consideration when evaluating the contract, as the loss of tax relief on these expenses could prove costly.

The following pages of HM Customs and Revenue website may be of use to you:

HMRC Travelling expenses - 24 month rule explanation

HMRC Travelling expenses - 24 month rule further details


17th January 2006

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