New IR35 Guidance Advice

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

New IR35 Guidance Advice

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