New IR35 Guidance Advice

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A little while ago, we talked about the HMRC devising a simple ‘business tax test’  for Contractors to better understand (or clarify) their correct tax status.

Since their announcement, several websites have produced results based on the test to help you better ‘score’ your own limited company. We have found the most comprehensive and easy to understand scoring system available online and have decided to share it with you. More information can be read here.

Business premises test Does the business have its own premises?

Yes = 10pts

PII test Does the contractor carry PII insurance?

Yes = 2pts

Efficiency Test Can the business increase revenue through efficiencies?

Yes = 10pts

 

Assistance test Does employed workers who bring in +25% of turnover?

Yes = 35pts

Advertising test  Has the business spent +£1,200 on advertising in the past year?

Yes = 2pts

Previous PAYE test   Has the hirer engaged the contractor without changing working arrangements?

Yes = minus 15pts

Business plan test  Does the business have a regularly updated business plan and separate bank account?

Yes = 1pt for each

Repair at own expense test  Would the business have to bear cost of rectifying any mistakes?

Yes = 4pts

Client risk test  Has the business failed to recover payments mounting to more than 10% of turnover in past two years?

Yes = 10pts

Billing test  Does the business invoice for work and negotiate payment terms?

Yes = 2pts

Right of substitution test Can the business send a substitute?

Yes = 2pts

Actual substitution test  Has the business hired anyone to carry out work in past two years?

Yes = 20pts

You can simply apply these tests to you business to see if IR35 is a consideration for you.  Your results can be compared to the following scale:

Low risk

20+ pts

Med risk

10-20pts

High risk

<10pts



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