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HMRC Business Entity Test

The 12 online questions and scores that make up HMRC’s business entity tests are as follows:

Test #AreaQuestionScore
1 Business Premises test Does your business own/rent separate business premises which are separate from your home and client’s premises? Yes = 10
2 PII test Do you need professional indemnity insurance? Yes = 2
3 Efficiency test Has your business had the opportunity in the last 24 months to increase your business income by working more efficiently e.g. by finishing the work/project earlier than projected but still receiving the full agreed payment?
For example you originally agreed with the client/engager that the work would take 3 months and cost 10,000 but you finished in 2 months and still received the full 10,000 at the end of the 2 month period.
Yes = 10
4 Assistance test Does your business engage one or more workers who generate at least 25% of your business turnover annually? Yes = 35
5 Previous PAYE test Have you been engaged on PAYE employment terms by your current client/end user within the last financial year with no significant changes to your working arrangements? 
If you are doing the same work you should answer yes to this question. Current engager also includes working at a different location owned by your engager or working at a different company but which is connected e.g. part of the same group.
Yes = (minus) -15
6 Advertising test Has your business invested over £1,200 on advertising, excluding entertainment in the last 12 months? Yes = 2
7 Business Plan test Does your business have a business plan with cash flow forecast, that is regularly updated, and a business bank account which is separate from your personal account and identified as a business bank account by the bank? Yes = 1
8 Repair At Own Expense test Would your business have to bear the cost of having to rectify any mistakes? Yes = 4
9 Client Risk test Has your business been unable to recover payment for work done during the last 24 months in excess of 10% of annual turnover? Yes = 10
10 Billing test Do you invoice for work carried out prior to being paid and negotiate payment terms? Yes = 2
11 Personal Service test Does your business have the right to send a substitute? Yes = 2
12 Substitution test Has your business hired anyone in the last 24 months to do the contracted work you have taken on? This could be demonstrated by sending a substitute in your place or by sub-contracting, but in both cases your business remains responsible for the work and for paying the substitute or sub-contractor. 
You can still pass this test if you had to notify the end client of the name of the individual you sent as a substitute.
Yes = 20
  • High Risk = 0 – 10 points
  • Medium Risk = 11 – 20 points
  • Low Risk = 21 points and above.

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