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Just two years after Business Entity Tests (BETs) were introduced by HM Revenue & Customs, they are to be scrapped from next year. Tax professionals have conducted a review of IR35 and found that the compliance checks were inefficient.

According to the IR35 Forum, the tests weren’t widely used and didn’t fulfil their intended purpose. They were intended to provide businesses with a way to measure the risk of them falling within IR35. From 6th April 2015, the BETs will be abolished.

If HMRC launches an inquiry on 6th April 2015 or after, the BET results won’t be used as part of the investigation. If an IR35 inquiry takes place before the 6th April next year and the business can demonstrate that it was in the low-risk band or outside IR35, the investigation will be closed.
Contractor accountancy services

By satisfying HMRC that all information provided is accurate and that the circumstances of the business aren’t likely to change, the organisation won’t launch another IR35 enquiry within the next three years.

The Recruitment and Employment Confederation’s director of policy and professional services, Tom Hadley, has called for clear guidance to be placed on HMRC’s website, while other professionals state that the tests were just another complication on top of already-complex legislation.

What is IR35?

IR35 was introduced in 1999 and took effect from April 2000. The legislation was intended to prevent contractors from working through intermediaries, usually a limited company or partnership, when they were actually performing the same duties as employees of their clients, while on the same terms. If HMRC decides that a contract between a contractor and client is an employment relationship, rather than self employed, they can charge a payment.

Checks to determine IR35

If you’re a contractor, there are a few checks you can make to ensure that you’re outside IR35 legislation. These include the following:

• Are you free to work when and how you want to? If you are required to attend a place of work at set times, and have to work in a specified manner, you could be caught within IR35.

• If you have business premises, you are likely to be classed as self employed.

• Invoicing the client for work completed is another indication of being self employed, and HMRC will probably want to see invoices as proof.

• If you spend money advertising your services, this is also likely to be viewed as a self employed status.

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About The Author

Karl Bilby

We work very closely with our expert accountants to bring you the latest factually correct tax and accounting news. We also enjoy writing about small business news that we hope you find useful!

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