With Christmas just around the corner and invites to social gatherings coming in, it is important for contractors to ensure that due consideration is given to their IR35 status, before taking part in such festivities.
Whilst attending such events will not deem you as caught by IR35 alone, we always advise that you pay to attend such events, otherwise it could be another negative issue stacking against you.
In the event of an investigation, HMRC have historically based their arguments on the three key tests determined by the Ready Mixed Concrete case; right of substitution, control, and mutuality of obligation (MOO), however HMRC may not always stop there.
HMRC are likely to consider whether the contractor is taking a financial risk, how many other clients the contractor has, and if the contractor is part and parcel of the client’s workforce. It could therefore be argued that attending social events organised by the end client could damage your IR35 status.
HMRC do not usually consider ‘part and parcel’ as a determinative IR35 test, however it still features within their IR35 ‘Employment Status Manuals’ and is covered within HMRC’s online ‘Check Employment Status for Tax’ (CEST) test. The key areas in testing whether a contractor is ‘part and parcel’ are:
oIs the contractor ever paid for time away from the services? For example, sickness and holiday pay.
oHaving a position of authority i.e. holding an ‘office’ within the client organisation
oDoes the contractor have any ‘line management’ type duties? These include hiring and firing workers, delivering appraisals and discussing employees pay.
oDo contractors interact with end client customers as a representative of the client.
The above factors would certainly have an impact on IR35 status. Other minor issues include:
oAccessing discounted canteens, gym memberships, training, or other subsidised benefits such as social events.
oBeing part of the end client telephone list, having a personalised email address or signature.
oNot being clearly identifiable as a contractor, for example by not wearing a visitor/contractor ID badge.
To conclude; part and parcel is usually not a determinative test by itself, however it is important to be aware of the potential ‘red flags’ which could be held against you in an IR35 enquiry. If you are working compliantly and outside of IR35, for example – having a clear right of substitution, autonomy over the provision of your services, a clear lack of MOO and a good demonstration of taking financial risk; then there is no problem in putting on your glad-rags and joining in with the social Christmas celebrations!