The latest IR35 Forum meeting highlighted many members’ feelings that HMRC’S Business Entity Test is being misused.
It is a common misconception that if you high risk on the Business Entity Test then you are caught by IR35, however this is simply not true.
HMRC‘s intention with regard to the BET was only to give contractor’s a chance to determine at which risk they are of becoming subject to an IR35 enquiry. Contractors who have a medium or high risk on the BET can still operate outside of IR35. In order to determine IR35 status, it is necessary to consider all of the same key tests and Case Law which has been in place for decades.
That being said, contractors who have a low risk score can be very useful, particularly if you are a Public Sector Contractor and have to provide assurance that you are paying the right amount of tax. If you have a low risk score simply providing evidence of this should put any further requests for assurance to bed. A low risk score also means that if HMRC come knocking and wish to undertake an IR35 enquiry, you can simply notify HMRC of this and provide the necessary evidence and they will leave you alone for 3 years and will not undertake a further IR35 enquiry within this time provided that your circumstances remain the same.
The BET should therefore be used as a tool only to determine at what risk a contractor is of being subject to an IR35 enquiry and should not be used to determine employment status. Instead utilise the services of Qdos, who have extensive experience in dealing with IR35 and who will be able to provide you with an informed decision regarding a contractor’s status.