When it comes to the IR35 business test, scoring points is the aim of the game, but how relevant is being ‘low risk’ in the eyes of the HMRC?
Many contractors question the relevance of the business entity test and go as far to challenge its relevance when it comes to IR35. The HMRC can scrutinise any contractors over disputes and inquiries regarding IR35, a legislation that exists in order to discern whether a contractor is indeed what they are claiming they are, and not in fact a ‘disguised employee’.
The answer to this question is that the test scoring in fact matters very much, and this is because if you score as ‘low risk’, it is enough to satisfy the HMRC of your contractor position enough to escape a fully blown IR35 case. The points matter because HMRC has given assurances that where someone is ‘low risk’ they will close the review as quickly as possible and leave the potential contractor alone from an IR35 perspective.
So basically, being classed as ‘low risk’ is what every contractor wants to be, and in the eyes of HMRC, the entity test can prove this.