HMRC launches new CEST tool to help contractors with tax status, but will it silence the critics?

Commenting on the launch today of the new HMRC Check for Employment Status for Tax (CEST) service, Susan Ball, employer solutions tax partner at RSM said:

'HMRC created the Check for Employment Status for Tax (CEST) service in March 2017 as the government cracked down on off-payroll working rules, known as IR35 in the public sector. The update issued today is the first official one recorded since 30 March 2017 although users over recent weeks had reported starting to see changes.

'In March 2019, HMRC revealed to the Public Accounts Committee that CEST had undergone no notable development, commenting: “There have been no significant changes to the CEST rules in this period.” 

'Since then, however, HMRC confirmed that its CEST tool would undergo enhancements before the IR35 reforms were extended to the private sector from April 2020 and that it would be issued before the end of 2019. 

'It is understood that around 30 questions have been updated or included and that several industry bodies and reportedly more than 300 stakeholders were asked to use the new version and feed in comments. Until now CEST produced an answer in only 85 per cent of cases.

'The new tool has also been rigorously tested against case law and settled cases by officials and external experts. After answering a series of questions, the CEST tool will return a judgement on whether IR35 legislation applies or not. Questions cover worker’s duties, substitutes and helpers, working arrangements, financial risk, worker’s involvement and contracts (including if working for others).

'It must be remembered that CEST is the only tool that will produce a result that HMRC will stand by - provided the information input is accurate and the tool is used in accordance with guidance. 
'While CEST has generally been accurate in cases where the employment status is reasonably clear, it has been criticised for not providing a definitive answer in more borderline or challenging cases, particularly in certain sectors. For example, it would be helpful if HMRC could now issue new  ‘Film, Television and Production Industry Guidance Notes’ last updated in 2012.

'Many engagers we have spoken to are planning to use CEST as part of their process ahead of the new off-payroll/IR35 rules commencing in April 2020. The fact the new version is out now is helpful in that regard as it allows engagers time to assess and check if indeed it will work effectively for them. If not, or if it’s only part of the process, it will provide time to look at what other methods might be needed to make sure they make correct status assessments ahead of the new rules in April 2020. 

'With just 20 weeks to go before the new rules come it is helpful and pleasing we have it now. We look forward to the HMRC technical guidance being issued as soon as possible once the election is over and the final legislation to enable engagers to effectively finalise their processes and procedures ahead of the start date on 6 April 2020.'

IR35 - Public sector

Changes to off-payroll working - IR35

The Government confirmed that the off-payroll working rules (IR35) will be reformed from 6 April 2020. It’s important not to underestimate the impact of these changes and to start preparing for them now. 

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