Business Entity Tests to be Abolished

It has been confirmed by HMRC that as of 6th April 2015, the Business Entity Test (BET) will be scrapped. There are also no plans to replace the BET. Though they have stated that they will shortly publish updated guidance on GOV.UK.

The main reasons for the BET being abolished are cited as:

  • Very few people used them; and
  • They were not fulfilling their intended purpose

So how will this affect public sector contractors? As in 2012, new rules were introduced by the Treasury governing individuals operating through their own limited companies who provide services to the public sector.

All workers are required to provide evidence of their IR35 status or renewal of their contract. If they cannot do this, the contract could be terminated and their details may potentially be passed to HMRC.

Although many were critical of the Business Entity Test, for those contractors who were able to achieve a low risk score the BET was useful, particularly for Public Sector contractors, where a low risk score is (until 06 April 2015) sufficient to demonstrate to their end client that they are paying the appropriate amount of tax.

It remains to be seen, how this will affect Public Sector Contractors, given that the Public Sector Guidelines refer to the BET throughout. In the immediate future however, nothing changes until 6th April 2015, however we will be keeping up to date with any announcements from HMRC and inform you of the outcome.

By:Sam Greenwell

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