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Revenue unveils new tests to determine employment status

11 May 2021

HM Revenue & Customs (HMRC) has released a series of tests which are designed to help determine the employment status of workers.

The IR35 legislation is intended to prevent individuals from using intermediary companies to supply services rather than being directly employed by their clients, and the new tests take the form of a series of questions and scenarios, complete with a scoring system.

The tests cover such areas as: whether your business owns or rents premises which are separate from your home and the end client’s premises; whether the business engages any workers who bring in at least 25% of your annual turnover; and whether the current client has engaged you on PAYE employment terms within the 12 months ending on the last 31 March.

Other areas covered include: business plans, advertising, efficiency, professional indemnity insurance, client risk, repair at own expense, billing and substitution.

Small business representatives have criticised the tests, arguing that they do not take into account key issues that were brought to the Treasury forum, and expressing concern that the Revenue has missed the chance to bring ‘clarity, transparency and fairness’ in dealing with IR35.

HMRC has stated that the legislation is not ‘set in stone’ and could change in response to feedback.

The full legislation can be viewed here: http://www.hmrc.gov.uk/ir35/guidance.pdf.

We can help with your tax and business planning needs. Please contact us for further advice and assistance.

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