Contracting, expenses and tax

[TheGreatSoprendo]

Having been made redundant recently, I may have an opportunity of a 3 month contracting role. The issue with it is that as it's approx a 3 hour journey from where I live, to make it work I'd need to stay over during the week and travel home on weekends.

As it's a contract role paying a day rate, the recruitment agent is suggesting I could set up a limited company and offset the cost of the accommodation against tax. Having always been a permanent employee in the past I have no idea of how this would work or the legalities of it, so any advise/experiences would really help me.