The IR35 Business Entity Test…Have you taken it?
In HMRC’s efforts to help contractors understand the legislation and give some guidelines to self-assess their status, the Business Entity Test was born.
The test is a series of questions, with each answer worth a number which are then tallied up to a total which is worth a level of risk of investigation (low, medium or high). It has proven relatively controversial and many industry professionals desist its use as it is actually quite difficult to get a low score, even for an apparently obvious genuine contractor, nor does it assess your status thoroughly enough to be solely relied upon.
Most will use the test in the hope of a low score, as if you are so lucky, in the event of an enquiry from HMRC, you are able to provide them with your results (and sufficient evidence) and you will not be enquired again for a further 3 years. It is important to remember, however, that having a low score on this test does not mean you are necessarily outside of the legislation, just that you are at a lower risk.
The majority of contractors, genuine or otherwise, will fall into the medium to high risk category. It is important, therefore, to ensure that you have had a professional review of your status completed (contract and working practices). By not taking reasonable steps to ascertain your status, you run the risk not only of getting caught, but of larger penalties if you are caught.
You can take the test online here. We also have videos and a downloadable guide to keep you on track with the legislation and as part of our service, offer an annual review service in partnership with Qdos Consulting.