IR35 Business Entity Tests

IR35 Business Entity Tests Scrapped

3 November 2014

HMRC has announced that its much criticised IR35 Business Entity Tests (BETs) are to be scrapped from 6th April 2015. A review by the IR35 Forum found that the tests were used very little and not fulfilling their intended purpose.

HMRC have confirmed that in the meantime businesses that can still show that they would fall within the low risk category from taking the tests will still be able to have any IR35 enquiry stopped and that there would be no new HMRC enquiry for a further 3 years.

In addition HMRC will also withdraw the example scenario’s that were published at the same time as the BETs.

HMRC will instead be issuing new Guidance on IR35.

When the IR35 Business Entity Tests were initially introduced they were criticised for focusing too much on the business and not the work the businesses were undertaking. The Business Entity Tests consisted of 12 questions designed to identify if your business was high, low or medium risk in respect of an IR35 enquiry. By many the scoring system was criticised for making it very difficult for businesses to be classed as low risk and therefore even from the outset they were not used. The aim was that the tests would be used by businesses to cease an HMRC investigation but this rarely happened.

Umbrella Accountants LLP specialise in providing accountancy services to small owner managed businesses.