As we write this, more and more companies across the UK are finalising their plans for the work Christmas party – after all, sometimes you need to book early. As a contractor, you may feel that this isn’t a question you need to worry about. More and more, though, contractors are being invited to their clients’ Christmas party. What should you do?
As contractor accountants, we have an unusual extra perspective on this. We want to look at it from the perspective of IR35.
Although the IR35 legislation dates from 2003, it’s never really reached a point where all contractors feel like they understand it. We still get more queries about IR35 questions than any other one topic.
Could Attending an Employees’ Function Change Your Tax Obligations?
The big test in IR35 is about the question of ‘disguised employees’. The criteria for judging this are mostly based on three tests which we went into in detail recently. However, the word ‘mostly’ can be deceiving here.
HMRC can also assess your status based on categories including:
- Paid holidays being part of the pay structure
- Specific benefits that are or are not in the contract
- The intentions of both parties involved
While two of these are easy to confirm just by checking the contract, intentions have to be gauged by actions. An invitation to the staff Christmas party is an action that could the intention to treat you as staff; accepting it is an action that could suggest the intention to reciprocate this treatment.
Accordingly, we would always advise contractors or freelancers to politely decline any invitation to the Christmas party. While it can be a useful strategy for building and strengthening relationships with key contacts and stakeholders you work with regularly, it could affect your IR35 status.
The same is true for other employee-focused social events; even a company retreat where real work is done for part of the time might place your status at risk if enough other factors are called into question.
The good news for some of you reading this: If you don’t tend to enjoy employee functions like this, you have a perfect reason to decline right here, one nobody could take offence to.
For any other unusual questions, whether about IR35 or any other aspect of contractor financials, don’t hesitate to get in touch and we’ll be happy to help.
