HRMC to scrap Business Entity Tests, contractors rejoice

In news that falls under the “it’s about damned time” category, Her Majesty’s Revenue & Customs has decided to scrap Business Entity Tests for IR35.

Contractors are practically giddy with the news that BETs are soon to be no more, especially considering how shedloads of firms have been using them incorrectly. While it will be some time until HMRC dismantles the much-maligned test, the death knell for BETs has been sounded: next April will see them rubbed out of existence.

We all owe a massive debt of gratitude to the IR35 Forum, the focus group that made the recommendation to the Government in the first place. Not only that, but somehow somewhere a minister was listening to the IR35 Forum for once. If you ask me I’ll be going down to my local and raising a pint in its honour tonight.

For what it’s worth, the BET’s time has come, and then some. BETs have been used wrongly by many public sector clients to establish employment status when it came to its contractors. The whole process was just so wrong-headed that even the taxman saw that something needed to be done; the abolition of the tests, which is exactly what the IR35 Forum suggested, was seen as the best and only way to fix the problem.

Of course now that BETs will be a thing of the past by next April, it’s entirely possible that these same clients that tried to use them to establish employment status will just find some other tool to misuse and mangle. Surely there is a bit of a gaping hole left by the removal of the tests, and right now it’s unclear what HMRC will institute to fill this new gap. It’s not even clear if there will be new guidance on the issue to begin with, let alone a replacement put forward by the tax authority.

Honestly, HMRC has had a devil of a time trying to get IR35 across to normal Brits that don’t have an advanced degree in accountancy. To its credit, the taxman said it would rather spend a bit of time, effort and cash making IR35 clearer to everyone instead of investigating possible violations and collecting unpaid taxes. Yes, I know – I’m skeptical too, but let’s not forget that HMRC is technically on our side. Well, sometimes at least.

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