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November 2014

IR35 Business Entity Tests

The IR35 rules are designed to prevent the avoidance of tax and national insurance contributions through the use of personal service companies and partnerships.

The rules do not stop individuals selling their services through either their own personal companies or a partnership.  However, they do seek to remove any possible tax advantages from doing so.

One of the ways in which businesses, advisers and HMRC determine whether or not the IR35 rules apply is by the use of Business Entity Tests (BETs) which were introduced in 2012.  The points based system is used to risk assess whether a particular arrangement is caught by the rules.

The IR35 Forum has recently reviewed the approach to administering IR35 and found that the BETs were not helpful to businesses as they were:

  • used very little
  • not fulfilling their intended purpose

 

As a result the review recommended withdrawing the BETs.

HMRC have accepted this recommendation and will withdraw the BETs from 6 April 2015.  

If you are concerned how this change will affect you or your business please contact us on 024 7651 8555 or 0121 711 2468.