IR35 Business Tests
The IR35 Business Tests, called the IR35 Business Entity Tests, set up by HMRC with the help of the Professional Contractors Group are going to be withdrawn. The date for the IR35 Business Tests to go is in April 2005.
HMRC said that the IR35 Business Tests were seldom used. They also said that the IR35 Business Tests were not fulfilling their original purpose.
They are not a good measure of whether a contractor is caught by IR35 or not.
They are going to publish further guidance but the IR35 Business tests will not be replaced.
Abolish IR35 Business Tests
The advice they got from independent advisers was the test were not working in the way intended and it would be best if they were abolished.
The Association for Independent Professionals and Self Employed (ex the PCG) are pleased that the IR35 Business Tests will be abolished – even theough they helped set them up in the first place.
They say that they have argued since their inruduction that they were “flawed in both scoring and application”.
The tests were only meant to be a guidance but in some areas of the public sector the IR35 Business Entity Tests were treated as if they were Tablets of Stone and contractors had to pass the test to be taken on as contractors.
It’s good news for contractors and freelancers that these IR35 Business Tests have been abolished. They were always ridiculous. It was almost impossible to pass the test. If they were taken as gospel then almost all contractors would be caught by IR35.
Although the Association for Independent Professionals and Self-Employed helped creat the IR35 Business Tests, it was HMRC that created the scoring system – and they made it ridiclously difficult to pass.
The use of it in some areas of the public sector was foolhardy. This is one test that won’t be missed.
While they are at it they could abolish IR35 too. there are no people leaving employment on Fridays and starting as contractors at the same firm on Mondays now – and that was the reason IR35 was set up.