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Ever since their intrduction more than two years ago, they have been plagued by criticism that they were misused and were not fit for purpose. (See: Analysis of new IR35 guidance - Shout99, May 2012).
A significant part of the problem was a complete misunderstanding as to their purpose. They appeared to be used to judge a contractor's status, whereas their intention was to judge a contractor's risk of an investigation.
There was yet more criticism when it was announced that they would be at the heart of the Government's 'contractor tests' for freelancers working in the public sector.
They were introduced in this role in as a response to increasing media exposure of public sector workers, such as Ed Lester, Head of the Student Loans Company, who operated through their own limited companies. This had the effect of reducing their tax liabilities even though they were effectively full-time civil servants. (See:
HMRC's business tests at heart of new rules for contractors - Shout99, Sept 2012)
A recent damning report from the House of Lords also recommended that HMRC undertakes a full consultation on how the Business Entity Tests could work better to provide greater certainty for taxpayers.
Abolished
Now after several meetings of interested parties from the IR35 Forum and a focus group made up of independent advisors, they have reported back to the industry/Whitehall body, IR35 Forum, which introduced them int he first place.
One of the concerns raised was that the BETs were being used incorrectly in the public sector. The consensus of the group was that the BETs were not working in the way they were intended and that it would be best if they were abolished.
The tests also comprise six examples or scenarios of IR35 risk and there were also discussed at the meeting. They were considered less controversial than the BETs but many of the focus group didn’t find them helpful.
At the recent IR35 Forum meeting, It was felt that there was not enough detail in the scenarios and that it would be better to have a summary of the case law.
It was agreed that there would be further discussion about these recommendations for BETS.
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Susie Hughes © Shout99 2014
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