HM Revenue and Customs announced that it will reform its ‘check employment status for tax’ tool ahead of approaching IR35 changes in the private sector.

The tool was first introduced in 2017 to help individuals and organisations decide if a worker should be treated as employed for tax purposes. It takes users through straightforward step-by-step questions.

HMRC said it will launch an enhanced version of the CEST tool before the end of the year. It said worked that it has worked with more than 300 stakeholders to make the tool clearer, reduce user error and consider more detailed information.

“To date, the tool has provided a determination in at least 85% of uses. As a minority of employment cases can be less straightforward, we’re giving these customers detailed help and guidance, including one-to-one support from specialist advisers on our helpline,” HMRC stated.

On April 2017, HMRC implemented reforms of off-payroll working rules for the public sector to crack down on companies using ‘disguised employment’ as a way of getting around their tax and national insurance obligations.

HMRC is set to extend the IR35 off-payroll working rules to the private sector from 6 April 2020. In its latest announcement, the HMRC published further guidance ahead of the reform.

“From this date, large and medium-sized organisations will become responsible for assessing the correct employment status of the contractors they engage to work for them,” HMRC stated. “If it is determined that the rules apply, the organisation that pays the individual’s own limited company will be responsible for deducting and paying the associated employment taxes and NICs (national insurance contributions) to HMRC.”

Seb Maley, CEO of IR35 specialist Qdos, commented, “The latest guidance from HMRC relating to next year’s IR35 reform is lightweight and fails to address our concerns regarding CEST or particular aspects of the incoming reform, such as the specific rules around how a contractor can overturn an unfair IR35 decision.”

“With this in mind, private sector firms that rely on contractors and want to continue benefitting from engaging these workers compliantly outside IR35 would be wise to seek specialist advice,” Maley said.