HMRC withdraws tax and NICs guide for intermediaries

North Wales based chartered accountants Pritchett & Co Limited are warning freelancers, contractors and the self-employed that HM Revenue and Customs has withdrawn a guide to tax and National Insurance Contributions (NICs).

The Business Entity Tests (BETs) were introduced two years ago with the intention of making it easier for people working through a limited company or partnership to negotiate IR35, the NICs legislation.

However they have now been withdrawn after a review indicated few people used it and it was failing to fulfil its purpose.

Andrew Morris, director at Pritchett & Co Limited, said: “The withdrawal of BETs means they will no longer be taken into account when HMRC starts any enquiry linked to IR35 on or after April 6 next year”.

“The guidelines were introduced to help people working for a client through an intermediary, such as a limited company or partnership and calculating liabilities”.

"The tax authority thought that the guide would help make it easier to administer the regulations and help people meet the IR35 test where all payments to the intermediary are treated as employment income and subject to NICs”.

“However it has been criticised for being poorly designed and misused from the outset”.

“People wanting guidance on IR35 are better advised to speak to a qualified accountant.”

Following criticism from small firms and people struggling with the regulations, HMRC set up a review body – the IR35 Forum – to see whether people were being assisted.

The review body concluded that the guide was not fit for purpose, causing HMRC to withdraw BETs.

For more information on IR35 rules for intermediaries, please contact us at info@pritchettandco.co.uk or call us on 01492 534250.

The author is a director at Pritchett & Co Limited, Chartered Accountants and Chartered Tax Advisers, members of UK200Group with offices throughout the UK and Associates overseas.