Part and parcel

What is the part and parcel test?

To determine a contractor’s IR35 status, HMRC will employ several tests, one of which is known as ‘part and parcel’. This is where HMRC will look to see if a contractor has become so integrated into the client’s own organisation, one could argue the contractor is indeed ‘part and parcel’ and perhaps plays an integral part in the client’s own business.

What's the test looking out for?

The ‘part and parcel’, or ‘integration’ employment status test asks whether the worker is integral to the end client’s business or merely an accessory to it.  A genuinely self-employed person should only be an accessory to their client’s business, carrying on a business outside and separate from their clients’ organisation.

Part and parcel alone won't be enough to prove your status

Some of these points mentioned above are not enough to put you inside of IR35 on their own.  If you are subject to an IR35 enquiry, HMRC will consider all of the evidence to build up a complete picture of your working practices. Whilst things such as making decisions regarding the client’s staff can alone be a strong point leading to employment and having an integral role in the business, others such as using an employee security badge would not be enough alone to give the same indication.

Some contractors tend to believe that a lengthy contract period is enough to put you inside of IR35; this is not true. However, the longer you stay with the same client, the easier it becomes for you to, out of habit, become part and parcel of the organisation. The client begins to stop seeing you as a temporary fixture, but as an integral part of their business, expecting you to be there and rely on you being there. That is often when contractors find each of the points mentioned above start to creep in, and before you realise it, you have become part and parcel, and you have started to look like an employee.

So, while little things such as not eating subsidised foods and not having your own designated work station may seem insignificant, they help to remind you and your client that you are not part of their organisation and you are indeed an independent contractor in business on your own account.

Part and parcel in practice: A case study

In the first-tier Tax Tribunal case of Slush Puppie Ltd v HMRC (2012), Mr Sandford was engaged by Slush Puppie Ltd (SPL) as a self-employed engineer.

All SPL service suppliers were provided with a uniform which included the SPL logo. It was particularly important for engineers to wear the uniform when visiting customers such as schools where personal ID was important to the customer; for similar reasons, all service suppliers carried an SPL business card.

SPL provided Mr Sandford, as well as other service providers, with a mobile phone for work purposes and requested that this be kept switched on at all times so that contact could be made whenever necessary. By retaining ownership and control of the phone SPL sought to protect their customer base.

Mr Sandford did attend the service meetings organised by SPL, but was not strictly obliged to do so. The tribunal concluded that attending service meetings or working in close co-operation with SPL did not demonstrate that Sandford was an integral part of SPL’s business in the way that employees were, stating;

"it is true that the outward appearances of Mr Sandford’s business made it seem to SPL’s customers as though they were dealing with SPL itself... That SPL held Mr Sandford out as one of theirs was the important thing for customer 25 confidence but it is not decisive of Mr Sandford’s status."

The outward appearances of Mr Sandford’s business made it appear to SPL customers as though they were dealing with SPL itself. Mr Sandford’s wearing of a uniform, using business stationery showing SPL’s mobile phone number and an SPL e-mail address, combined to reassure customers that Mr Sandford was ‘an SPL man and that SPL vouched for him’ were all important to SPL so as to instil customer confidence, but was not decisive of Mr Sandford’s employment status.