HMRC’s Check Employment Status for Tax (CEST) tool was published in March 2017 and has been heavily criticised from the outset with many industry experts claiming it is not fit for purpose. Figures released by HMRC now suggest that they may have been right! 
What is CEST? 
 
CEST is HMRC’s Check Employment Status for Tax tool and can be found here. 
 
It was published in March 2017 with the aim to help people check their employment status based on HMRC’s criteria and according to HMRC the service will give you a HMRC opinion on whether: 
 
- IR35 applies 
- Off-payroll public sector rules apply; 
- Or if in fact, the worker should be paid through PAYE for the engagement. 
How does it work? 
 
The tool is essentially a questionnaire, consisting of 4 sections:- 
- Personal Service 
- Control 
- Financial Risk 
- Part and Parcel 
 
Critically the tool seems to ignore Mutuality of Obligation – and this is one of the key points being challenged by industry experts. 
 
The tool does not store the result and is designed to be an indicator only. 
 
The challenge 
 
Since its introduction last year, industry experts have tackled HMRC on the accuracy and reliability of the tool – and for more disclosure on how it works. ContractorCalculator and its CEO Dave Chaplin have been investigating CEST since its introduction and have been pivotal in HMRC finally releasing data and statistics for review. 
 
The stats 
 
So far, over 500,000 assessments have been made using the tool 
 
54% of assessments via CEST have determined that IR35 does not apply 
(Given the blanket assessments in the public sector, and in particular, the NHS, since the reforms in April 2017, this is somewhat surprising). 
 
31% of assessments via CEST have determined that IR35 does apply 
 
15% of assessments via CEST have proved inconclusive (once again confirming how open to interpretation IR35 is). 
 
In a damning statement from HMRC, following a number of Freedom of Information requests, they have admitted that they hold no evidence of the accuracy of the tool. 
 
What’s next for CEST? 
 
Industry experts are continuing to challenge HMRC with the Institute of Chartered Accountants in England and Wales (ICAEW) writing to the Financial Secretary to the Treasury advising that the CEST tool is not suitable for use in the private sector. 
 
So, the saga continues! 
 
Further reading: ICAEW Letter 
 
 
 
 
Written by: 
 
Nicola J O'Sullivan -  
Effective Accounting 
 
Founder | Xero Champion | IR35 Expert 
 
 
Tagged as: CEST, IR35
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