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 your engagement to be caught by IR35 alone, we always advise that independent contractors pay to attend such events, otherwise it could be seen by HMRC to be a negative issue weighing against an outside determination.
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 considered part and parcel of the client’s workforce. It could therefore be argued that attending social events organised by an end client could damage the IR35 status of an engagement.
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:
The above factors would certainly have an impact on IR35 status. Other more minor issues include:
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 work against an outside of IR35 determination.
If it has been determined that your Personal Service Company is working compliantly in an outside of IR35 role, for example – having a clear right of substitution, autonomy over the provision of the services, a clear lack of MOO and a good demonstration of taking financial risk; then I see there being no problem in putting on your glad-rags and joining in with the social Christmas celebrations!
Ask away! One of our team will get back to you!