Being a business owner isn’t easy and understanding what expenses you can claim is no mean feat either. Add life as a mobile business into the mix, and things can feel even more complicated.
One of the most troublesome topics that mobile business owners often find themselves navigating is the matter of travel expenses. Many are unsure as to whether they are able to claim travel expenses and as a result, wind up in a muddle when it comes to their accounts, bookkeeping and tax returns.
Fear not though, freelancer, because we’re here with some expert advice on the subject to hopefully answer your questions and iron out any confusion you may be experiencing.
What qualifies as a mobile business?
A mobile business is exactly what it says on the tin – a service, offering or profession that is mobile, as opposed to being rooted in one permanent location such as a shop or office.
Some common examples of mobile businesses include:
- Nail technician
- Make-up artist
- Dog walking and/or training
- Food truck
- Pet grooming
- Personal trainer or sports coach
- Educational tutor
- Bicycle repair
- Car valet
- Event or wedding planner
These are all businesses that don’t require bricks-and-mortar or a fixed location in order to function or provide for their customers. The benefits of operating in this way are manifold, including being able to expand your reach and limit the cost of overheads that non-mobile businesses are subject to.
As a mobile business owner, the nature of the job means you’ll likely spend a great deal of time travelling from A to B. That’s why it’s so important for mobile entrepreneurs to understand what they can claim back as travel expenses.
What kind of costs are covered under travel expenses?
Travel expenses are allowable for any journeys you make for business reasons, outside of travelling to your normal workplace. For example, if you have an office, you can’t claim for the cost of travelling there from home, because it’s your normal place of work.
But, if you need to make a different journey, such as buying train tickets to a client meeting or staying overnight in a hotel for a conference, these are allowable.
Other typical examples of travel expenses include:
- Transport such as taxis and trains
- Car rental
Are mobile business owners allowed to claim travel expenses?
As somebody who works for a business, you cannot claim travel expenses for travelling from your home to your place of work. So, for example, if you work in a shop or in an office and you’re based there every day, you can’t claim for your commute.
For mobile business owners, however, things are a little different because you are allowed to make reasonable travel expense claims for journeys to and from a temporary place of work.
A hairdresser or plumber, for example, who has to travel from their home (or elsewhere) to a client’s premises in order to deliver their service, is allowed to claim the cost of this work-related travel.
This includes things like:
- Train, bus and underground tickets
- Car mileage
- Road tolls
- Taxi fares
- Parking costs
- Ultra Low Emission Zone (ULEZ) fees (London only)
The 24-month rule for claiming expenses
If you’re working on an extended contract then you might need to travel to and from a premises for a longer period of time. The trouble is, do this for too long, and it starts to look like it’s regular place of work, and you’re just sneaking in expense claims for it. To clear things up, HMRC introduced the 24-month rule.
The 24-month rule dictates that if a contractor works at a temporary place for a rolling period of 24 months or more, they aren’t able to claim travel expenses.
These time periods are based on contract expectation, rather than on how long the contract ends up being. Below are a couple of examples to demonstrate what we mean by this.
You agree to a 12-month project for a client, which involves travelling to their site every day. Because the expected length of the contract is less than 24 months, you can claim travel expenses.
The project is extended for another 6 months, which brings the contract to 18 months in total. You can still claim, because you are within the 24-month period.
You agree to a two- and half-year contract, which involves travelling to the client’s site each day. The contract is expected to be longer than 24 months, so you cannot claim travel expenses, even if the contract ends up taking less time.
You agree to an 18-month project for a client, which involves travelling to their site every day. Because the expected length of the contract is less than 24 months, you can claim travel expenses.
The project is extended for another 12 months, which makes the contract longer than the 24-month period. You cannot claim travel expenses for the extended period.
The 40% rule for travel expenses
It’s also crucial to be aware of the 40% rule because it overrides the 24-month rule in scenarios where you don’t work more than 40% of their time in one place.
A workplace is classed as temporary when a contractor spends less than 40% of their time there. Again, this is a rolling, cumulative amount, just like in the 24-month rule regulations.
It’s worth noting here that HMRC defines a ‘place’ of work not as the final destination (client premises) but rather as the journey you take to get there.
If an electrician has three different clients all based in Manchester city centre and goes to each of their premises on a different day of the week, HMRC classifies this as one ‘place’, as the journey to reach each one is substantially similar.
So, where the 40% rule is concerned in this example, the contractor would need to consider how much time they’re spending in Manchester city centre – not how much time they’re spending at each individual client premises in this vicinity.
These are all vital factors that come into play when calculating what travel expenses a mobile business can claim for.
Looking for more advice on all things finance and accounting? Head over to our Freelancer Finance section where we’ve got a whole hub of handy guides ready to help you out.