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IR35 Forum minutes: business entity tests aren’t working and should be abolished

Contractors have learned from the latest minutes of the IR35 Forum meeting held on 7 May 2014 that the business entity tests (BETs) are not working as intended, and that they should be abolished.

“The business entity tests have no basis in case law but have been shown to be used by client organisations, particularly in the public sector, to determine IR35 status,” highlights ContractorCalculator CEO Dave Chaplin.

“That an IR35 Forum sponsored focus group has determined the tests are not fit for purpose and should be abolished should surely come as no surprise to anyone.”

The minutes of the 7 May meeting, which have been published so late by HMRC that another meeting has been held since, also highlights that a meeting will be held “to discuss the recommendations for the BETs”, but no indication was given as to when.

HMRC told forum members that it: “Would much rather provide people with the tools to understand the legislation up-front rather than having to undertake compliance investigations to put it right later.”

But the committee members responsible for the promotions and communication of HMRC’s IR35 support and resources, HMRC’s Sarah Radford and Bauer & Cottrell’s Kate Cottrell, complained that “the critical problem was having no budget”.

Chaplin’s view is that HMRC could overcome many of its communication challenges through greater engagement with the media: “ContractorCalculator has over 100,000 monthly visitors, yet no-one from HMRC or the IR35 Forum has tried to directly engage with us about disseminating its message to a broader contractor audience.

“Our surveys tell us that 98% of contractors already know about IR35, so basic awareness is not the issue. But we’d welcome the opportunity to work with HMRC to better educate contractors about how to deal with IR35 so that fewer contractors are forced to undergo IR35 investigations.”

The review of the new IR35 administration framework introduced in May 2012, which includes the BETs and other measures, is due to be published during September 2014. However, this report has been under preparation for over 12 months. Or as the minutes reflect: “there has been some delay on the publication”.

Published: 22 September 2014

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