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Business entity test

Posted by: Intouch | 20.12.12

Intouch Accounting

Business entity test

How does the business entity test being brought in by the government for freelancers and contractors tie in to the new employment tests being suggested by the BBC for its workers?

Is this likely to become much more common?

The HMRC’s business entity tests brought in during 2011 have been set up primarily for freelancers and contractors to self-assess their risk level of falling outside IR35 regulations.  The BBC’s new tests do not affect these at all. These are additional tests which will apply – initially at least – only to those who want to work for the BBC in specific freelance roles.

Being a media and entertainment company, the BBC naturally uses large numbers of freelancers in its usual course of business. Following criticism by the House of Commons Public Accounts Committee they conducted an internal review of how they pay their freelancers. Recommendations made following this review prompted the BBC to develop additional employment tests to help give them clarity on the employment status of their freelancers. They are currently formulating these tests in discussion with HMRC and are likely to refer to the HMRC’s Film Unit Guidance in doing so. From April 2013 the BBC intends to apply these additional tests to all of its freelance contractors. Its ‘Review of Freelance Engagement Model’ report states these tests will cover four key areas:  Length of engagement; Certainty of work; Manner of payments and income earned elsewhere; Control.  Responding to these tests will of course mean additional work for contractors applying for BBC posts in the future. Additionally, the difficulty will be that these objective tests are not backed up by statute, so there may be few concrete guidelines to help contractors steer a safe course. This may mean, in practical terms, that disputes around the application of these tests are worked through case by case until a clearer picture emerges. There may be some good news though. If the BBC gains HMRC approval of an employment status type for a particular role, this will give clarity for both them and the contractor.

The BBC has said it hopes their initiative is one which will potentially be used as a model across the whole broadcasting industry. Media and entertainment is regarded as a special business type, with its own unique business practices, so it is possible that other media companies may develop their own tests in the future. However, outside of this business sector it seems unlikely, at this point, that employers will create new additional contractor employment tests. What is less certain is how many other public sector organisations will develop a similar test applicable to their own business sectors.


This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.