Bite Size IR35: Spot the Difference

When working at your client’s site, particularly for an extended period of time, our social nature as human beings makes it easy to become integrated into their business, otherwise known as becoming part and parcel with your client’s organisation.

Nobody is expecting you to stop talking to your client’s employees so with the strictly social aspect aside, it is important that you remain differentiated from your client’s employees in business terms. Integrating too much blurs the line between limited company contractor and company employee which can lead the Revenue to see you as a disguised employee. Make friends, not colleagues.

The idea of this test is that you are not treated equally to the employees at your client’s business, as you are a separate entity. This might include not having your client’s business and logo on your email signatures but your own company instead, not receiving staff benefits such as a subsidised canteen or gym and not being included on any internal staff lists. Anything which blurs the line between you and your client’s employees is generally ill-advised. As a general rule of thumb, although use your common sense when applying, anything your clients can do, you can’t and anything they can’t do, you can.

This test is a bit of an all-rounder when it comes to IR35 as it actually applies to all the other tests as well, so although it is not often seen as a dominant aspect when looking at your IR35 status, it is truly quite important, particularly when assessing your working practices. Take the three dominant tests for example: Right of Substitution/Personal Service; your client’s employees cannot provide a substitute but you can, or the Control test; your client’s staff must complete their work when, where and how their employer tells them, but you don’t, or Mutuality of Obligation; your client’s employees expect continuous work and their employer is obliged to give it to them, but this relationship does not exist for you as a contractor.

It is all about being seen as a genuine business owner offering a service to another business, and not a temporary employee for a company.

Although this test essentially applies to all of an IR35 assessment, using a subsidised canteen, for example, will not determine your status alone. As with all factors of IR35, it takes a complete view of your situation to come to an educated conclusion. Having said that, contract clauses which stipulate that you would be subject to disciplinary action or performance reviews would likely fail an assessment.


By:Jane Hailstone

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