Sorting out your tax return is hard enough when you work solely in the UK, but if you work abroad for long periods it can be even more complicated. When contracting abroad your expenses are bound to be higher than when working at home, but knowing what you can reasonably claim is potentially confusing. It’s important that your trips abroad don’t end up costing money that you could have saved, so knowing what you can claim and how is crucial. Read on for an overview of how expenses work when you’re out of the country and how you can make sure you don’t end up left out of pocket.
Temporary Workplace Rules still Apply
The expenses rules that apply to travel arrangements when working within the UK also apply to overseas travel arrangements. These are known as the 24-month and 40 per cent rule and are as follows:
24-month rule: Contractors can claim travel expenses between their home and the client’s premises, as long as it is classified as a ‘temporary workplace’. For a workplace to be considered temporary at the start of a contract, the contract needs to be less than 24 months.
40 percent rule: If you spend less than 40 percent of your time working at one location it will most likely be classed as a temporary workplace for as long as you work there. This is even more likely if you work there at no fixed pattern.
If you have a lot of work to do for one client you may end up at their premises for more than 40 per cent of the time. However, as long as you don’t expect to end up working there for longer than 24 months it will still count as a temporary workplace.
What Expenses can be Claimed when Working Overseas?
The same rules for claiming expenses apply whether you’re in the UK or abroad, which is that all claims you make must be wholly and exclusively for business purposes. You can claim for one tax year at a time, and your self-assessment must be filed by January 31st if you do it online. You must be able to back up your claim with receipts and other documentation, just as you usually would in the UK.
HMRC provides benchmark scale rates for accommodation and subsistence expenses relating to most foreign countries. These can be used to calculate expenses such as hotels, meals and travels in most regions worldwide.
Travelling with your Spouse or Family
If you are working overseas for less than 24 months you can also claim travel expenses for your family or spouse. In order for them to be eligible for these expenses you must be working away from the UK for a continuous period of over 60 days. ‘Family’ includes immediate family only: spouse, children or registered civil partner. Travel expenses could cover up to two outward journeys and two inward journeys in any tax year for each member of the employee’s family. However, the deduction only covers travel costs: once the family arrives at the destination no expenses for accommodation or subsistence can be claimed.
An example of this scenario is as follows: Christopher, who is a renewable energy contractor with his own limited company and is ordinarily resident in the UK, needs to go to France for eight months to carry out a job. His wife accompanies him.
- The cost of Christopher’s travel to and from France is tax deductible because he is travelling to a temporary workplace.
- The cost of Christopher’s wife’s travel to and from France is also deductible because of the travel expenses she is allowed under the 60-day rule outlined above.
- Christopher’s accommodation and subsistence is deductible as a necessary part of his travel. His wife cannot claim any expenses for her own accommodation and subsistence.
Can Offshore Workers Claim Additional Expenses?
As an offshore worker on a temporary contract you can claim the expenses specified above as you need to travel long distances to get to your place of work, for example an oil rig or offshore installation. You can claim travel expenses whether you travel in your own vehicle or use public transport. Even if your employer pays some of your travel expenses, you can still claim for the difference up to the HMRC threshold of 45p per mile up to 10,000 miles.
You can also claim for accommodation costs and expenses if a delay in your plans means you have to pay for a hotel room of food, for example if you get to a port or helipad and bad weather makes it impossible to travel on the same day. Make sure you keep a record of all expenses whether they’re expected or not.
Offshore workers may also be able to claim expenses if they are required to clean, maintain or repair clothes needed for work. As the clothing needed for working on rigs or offshore installations is specialist and high quality, this can add up to a lot of money.
Some offshore workers may also need to pay for tools and equipment, and the maintenance of those items, which can be very expensive. These costs can be deducted against your earnings when your taxable income for the year is calculated. Claims can be backdated for up to four years, so you could still receive money back even if you no longer have the tools or work in the same employment.
Knowing the Rules
Making sure you know the rules is very important as you could be missing out on a tax rebate. However, it’s crucial to remember that you can only claim expenses for activities that are wholly and exclusively related to the purpose of doing your job. There is no exception to these rules and, if HMRC investigate and find you’ve done something wrong, you could find yourself on the receiving end of a very large penalty. It’s also worth remembering that these rules aren’t static and things can change so it’s important to stay abreast of any changes should they occur.
The HMRC website has plenty of information about expenses available for people who work offshore and overseas. If you know the rules, you won’t end up out of pocket.
