HMRC produced the Business Entity Tests and a series of questions for contractors to use with the idea of giving contractors a good idea of whether IR35 applied to their business.

But there were serious problems with the tests…

The Business Entity Tests were irrelevent or of only marginal value in deciding whether IR35 applied, the case law is of major importance.

IR35 is decided on a contract by contract basis and NOT on the set-up of the company and the director/shareholder.

Clearways Accountants wrote a series of blogs on the tests and you can now ignore all the information in those blogs.

The Business Entity Tests have been totally unfit for purpose and accountants and IPSE have been arguing against their use ever since they were introduced.

HMRC have announced that the tests will be withdrawn from April 2015.

What about IR35?

The IR35 legislation still applies if your contract fails on all three of the key tests:

  • substitution
  • control; or
  • mutuality of obligation

You will still have to treat the income you earn on that contract as “deemed” employment income and pay tax and national insurance.

If you need help determining the status of your contract then please contact Clearways Accountants on 01737 244298 for assistance.