No More BETs Please

Business Entity Tests replacement imminent

According to a meeting of the IR35 Forum on 11th February, the Minutes of which have only just been published, HMRC are working with the Treasury on updating the IR35 guidance before 6th April. This, of course, is the date that BETs are due to be withdrawn.

However, it appears that some public sector departments have already dispensed with them, acting in direct contrast to what HMRC has previously declared.

Last year it was announced that BETs were to be dispensed with but HMRC told freelancers that they could continue using the tests if they wished or were asked to do so as part of the assurance process when dealing with end clients in the public sector. Yet only recently I have come across a business, not a PSC, engaging multiple employees, all of whom are working on the same contract, yet who a government department are refusing the use of BETs as evidence of being outside of IR35.

This is ignorance personified amongst public sector bodies and is a clear indication that their ‘taxation officers’ have no grasp of employment status whatsoever. In the first instance, this business is obviously not your typical one man PSC, so it should have been apparent to the government department that IR35 was irrelevant. The department however failed to register this simple truth and continued to subject the business to providing acceptable evidence. Although words fail me, at the same time I am not surprised.

Only for IR35 enquiries that are opened on or after the 6th April 2015, will BETs not be taken into account. However, if HMRC opens an enquiry before then, and a business can demonstrate to HMRC’s satisfaction that they have taken the BETs with an outcome outside IR35 or in the ‘low risk’ band, then HMRC will close the enquiry. So in the remaining few days, if BETs are good enough for HMRC, the IR35 guardians, then how can these Whitehall buffoons decide otherwise?

Due to the tardiness in publishing the Forum’s minutes, much of what was discussed is already known to us but it is worth re-visiting the IR35 enquiry statistics that had previously been made public as these were discussed by Forum members.

The Forum discussed three points in relation to the above figures:

1. Following a new approach to IR35 compliance, the number of new enquiries increased in 2012/13. That really wouldn’t have been difficult in comparison to the previous 3 years and had it not been so, then there would have had to have been some serious questioning about the effectiveness of the ‘new approach’ that was heralded in May 2012.
2. The number of enquiries opened and the compliance yield in any given year will not directly correlate as the tax take will often relate to enquiries opened in earlier years. Whatever way you juggle the figures, the yield will always remain pathetic but, then again, thank goodness for that!
3. HMRC are committed to deploying resources to tackle 250 enquiries at any one time. They might have the quantity but I would seriously question as to whether they have the quality in some quarters.

The Forum resolved to meeting three times per annum, with the next meeting scheduled for 16th July.