New CEST tool

HMRC has just released a new version of the check employment status for tax (CEST) tool. HMRC want engagers to use the tool when making a decision about whether a contractor should be taxed as an employee for the off-payroll working rules.

The off-payroll rules are due to be rolled out to contracts with large private sector engagers from 6 April 2020, but the law is still part of the draft Finance Bill which will have to be passed by the new government after the election. For now, we have to assume that the roll-out of off-payroll working will happen, and it is already in place for public sector contracts.

The worker can also use the CEST tool to check whether their contracts are within IR35 either before or after 6 April 2020. However, the CEST tool should only be used for tax purposes, it does not provide a meaningful answer to whether an individual is entitled to employment rights. Also, it should not be used to determine the tax treatment of self-employed individuals working through an agency, when the agency rules in ITEPA 2003, s. 44 may apply.

HMRC says it will stand by the results of the CEST check. However, that doesn’t always apply in practice, as there have been tribunal cases where the outcome of the CEST has been discounted when presented as part of the evidence (eg RALC Consulting Ltd).

The CEST tool is not perfect and it is not impartial. HMRC says the CEST tool reflects its own view of employment status cases and law. There may be an equally valid alternative view, which could be argued in court.

Having said that, if the outcome of the CEST is that the worker is outside IR35, that is valuable evidence to support that position.

Written by the Tax Advice Network