New version of IR35 checking tool released by HMRC

26 Nov 2019

HMRC has released an updated version of the Check Employment Status for Tax (CEST) tool, which is used to determine whether a contractor should be classed as self-employed in line with IR35 legislation.

In 2017, HMRC introduced new off-payroll rules to the public sector, which saw some contractors' net income cut significantly. HMRC also shifted the responsibility for compliance from the individual contractor to a public body or recruitment agency.

From 6 April 2020, new tax rules will use the 2017 changes as a starting point for the extension to medium and large organisations in the private sector.

The efficacy of the CEST tool has been criticised as being not fit for purpose as it 'fails to deliver definitive answers' in many cases. HMRC promised to improve the CEST tool before April's extension of IR35, and has consulted stakeholders to help guide the update. It has also tested the CEST tool against case law and settled cases.

Commenting on the update, Andy Chamberlain, Deputy Director of Policy at the Association of Independent Professionals and the Self-Employed, said: '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.'

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