UK – New CEST tool for IR35 now available; previous version had received criticism (AccountancyAge)

AccountancyAge reported Monday that an updated “Check for Employment Status for Tax” tool, or CEST, has been released by HM Revenue & Customs (HMRC). The tool aims to let companies know whether a person should be classed as employed or self-employed under IR35 legislation that is set to take effect in the private sector in April. The tool was originally released in March 2017 but had received criticism from several corners.

HMRC said: “We have worked with more than 300 stakeholders to make CEST clearer, reduce user error and consider more detailed information. CEST was rigorously tested against case law and settled cases by officials and external experts. It is accurate and HMRC will stand by the results, provided the information input is accurate and it is used in accordance with our guidance.”

However, Andy Chamberlain, Deputy Director of Policy at the Association of Independent Professionals and Self Employed (IPSE) was less enthusiastic. He told The Register: "We have grave reservations about CEST. We've looked at the updated version and spoken to HMRC and we're still not satisfied it is accurate. It still does not test the mutuality of obligations (MOO), which is a key tenet of recent IR35 cases. Unless we can understand that the tool will never produce accurate results."

HMRC has previously responded to criticisms of the absence of MOO in the CEST tool by saying “It is assumed that a person using CEST will have already established MOO, which is necessary for a contract to exist, otherwise there would be no need to be using CEST to determine the status of the existing or hypothetical contract”.

Seb Malley, CEO of contractor insurance broker and tax advisor, Qdos, said: "Despite being tweaked, CEST still isn't fit for purpose. With IR35 reform only a few months away, recruitment agencies and end-clients shouldn't rely on it to deliver accurate information regarding a contractor's IR35 status.

A number of private employers have announced they will cease using independent contractors given the impending IR35 legislation given the onus placed on the hiring organisation to decide individual contractor status including GSK, Royal Bank of Scotland, HSBC and Barclays.

The new CEST tool is available here and SIA’s Guide to Implementing IR35 Off-Payroll Working Rules can be downloaded by members here.