CEST – Changes for the Better?

HMRC have made almost 40 updates to their Check Employment Status for Tax (CEST) tool this month to make it ‘clearer, reduce user error and consider more detailed information’ by including and making changes to around 30 questions. HMRC have announced that they will uphold a result the tool provides; as long as the information input into the tool is accurate, and that it is the only tool they will do this for. Consequently, this has left many businesses thinking that they need to use CEST in order for HMRC to stand by the outcome. 

However, the recent NHS case as well as RALC Consulting earlier this year are just two of the many examples where HMRC have wriggled out of the CEST result, stating it was “of no assistance to the tribunal in determining the issue”. 

Disappointingly, the CEST tool still does not consider all the vital areas for determining whether an individual is inside or outside IR35. Currently the tool focuses on the workers duties, involvement and contract, their working arrangements and financial risk. The tool also relies very heavily on substitution to provide a determination to the user. The updates to the tool have apparently been made based on case law however, Mutuality of Obligation (MoO) has still been omitted, a significant deciding factor in many cases.  

Although HMRC has stated it will stand by a result given, the tool is known for providing inaccurate determinations to contractors in the private sector and still struggles to make a determination in all cases. To make a correct inside or outside IR35 determination, all factors needs to be considered, one factor in isolation will not provide a definitive answer.  

We recommend those liable to determine individuals’ IR35 status to consider an alternative tool. There are tools available which allow for all factors to be considered, unlike CEST where weightings are placed on each question answered by the user, as well as allowing for management and review of those determinations and the various contracting parties to input. Currently with CEST, only one person can complete the questions and there is no way to go back in to update or check the result – it must be printed and saved manually. 

If you have any queries please do not hesitate to contact Karen Groat or your usual AAB contact.