With the deadline for IR35 assessment fast approaching, the latest update to HMRC's Check Employment Status for Tax tool (CEST) is still not fit for purpose.
That's the verdict of early testing from contractor insurers Qdos and the Association of Independent Professionals and the Self-Employed (IPSE).
The tool has just been updated following criticism of earlier versions, but Qdos CEO Seb Maley 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.
"From the wording of the questions to the tool's reliance on the right of substitution when providing an answer, CEST poses a risk, not just to contractors, but to the agencies and end-clients that choose to use it.
"Still, at this stage in the game, CEST doesn't take into account Mutuality of Obligation (MoO) either. Given MoO has been the deciding factor in a number of recent IR35 tribunals, that CEST still assumes it exists in every contractor engagement – when tribunal results show otherwise – is another reason not to trust it."
Andy Chamberlain, deputy director of policy at IPSE, agreed. 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, which is a key tenet of recent IR35 cases. Unless we can understand that the tool will never produce accurate results."
In employment law, MoO refers to the obligation of the employer to provide work and the employee to accept it.
The extension of anti-avoidance rules to the private sector from April next year and putting the onus on the hiring organisation to decide individual contractor status has already caused serious disruption between contractors and their employers and fears of large-scale departures of highly skilled staff.
A recent survey from Harvey Nash found that one in five UK companies are simply sacking contractors rather than deal with the headaches and increased responsibilities of the new rules.
HMRC sent us a statement:
“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.” ®
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