Determine the Risk Band your Contractors are in

In recent years, HMRC have introduced a test in a bid to simplify the complexities of IR35, and offer contractors a way of self-assessing their own status. 

The Business Entity Test (BET) was introduced in 2012, and will ultimately class a contractor as one of three categories: Low, medium, or high risk.

If a contractor is deemed to be in the 'low risk' band from the results of their test, this - supported by satisfactory evidence - can often be enough to deter a revenue inspector from delving any deeper into an investigation. In addition, if evidence of a contractor's low risk score completely satisfies an inspector, they will be given a reference number which means that, if the contractor's situation does not change in this time, they will not be the subject of another IR35 investigation for three years.

The Business Entity Test involves answering several questions, each of which carry a certain amount of points. When the test is complete, the points are totalled which will give a contractor their risk rating. 

By understanding the test and its purpose, you can help your contractors get a better idea of where they stand with regards to IR35.

Andy Vessey, Qdos' IR35 expert, said that, "Shortly after HMRC changed their approach to IR35, they were far more accepting of evidence passed to them. However, in cases I've been handling recently, they have become far more persistent and resilient, which significantly lengthens the time it takes to close the case down." 

Whilst the BET can aid a contractor in the event of an investigation, it is still advisable for professional advice to be sought. An IR35 advisor will use the BET result as part of their response to the revenue in the first instance of receiving a letter.

For a more in depth look at an IR35 investigation and exactly how it works, visit our most recent download released by Accounting Web here.