HM Revenue & Customs (HMRC) has announced that IR35 Business Entity Tests (BETs) will be withdrawn in April 2015 following tests that found that they were ‘unfit for purpose’.
BETs were first introduced just two years ago as a means for businesses to self assess their risk of IR35 but a review by the IR35 forum concluded that they had not fulfilled their intended purpose and were actually used sparingly by Umbrella Company employees and skilled flexible workers.
The industry has reacted positively to the news with Simon McVicker, IPSE Director of Policy and External Relations, revealing that the tests had created more uncertainty and were being used unfairly by some clients in the public sector in order to asses the tax status of flexible workers across the United Kingdom.
McVicker added: “The BETs had the potential to bring clarity to independent professionals working through their own limited companies. Instead the tests were badly designed, poorly scored and misused from the outset, much to IPSE’s dismay. I am therefore pleased to hear that they will finally be scrapped.”
A spokesperson for the Recruitment & Employment Confederation has since urged HMRC to be more transparent regarding its intentions for the updated guidance. Tom Hadley, Director of Policy at REC, said that the guidance should “be easy to find and fully integrated with the relevant tax information on the gov.uk website.”
IR35, which took effect in 2000, remains a complex piece of legislation with flexible workers that are ‘caught’ having to pay significantly more tax.