In the past 12 months, HM Revenue & Customs (HMRCs) online tool for determining IR35 status has failed to provide definitive results in 19 per cent of cases.
Launching an enhanced version of the ‘Check Employment Status for Tax’ (CEST) tool in November 2019, following serious questions over its adequacy, the Government promised that it would be a marked improvement.
However, that does not appear to be the case as in the year-long period to 24 November 2020 an ‘undetermined’ result was returned in 188,719 cases out of a total 975,416.
HMRC maintains that in the majority of cases, CEST produces a reliable determination but that where the result is indeterminable, this is likely because of user error or because the case is not clear cut.
Many industry experts believe the tool is far too indecisive, considering the roll out of the new IR35 rules is only a matter of weeks away, and does not effectively account for the complexities associated with the off-payroll legislation.
There also remains some fundamental issues even with the enhanced tool; for example, areas such as ‘Mutuality of Obligation’, one of the key tests of IR35, is still not included anywhere within CEST.
Where CEST is unable to determine a result, HMRC encourages users to consult with them further and refer to the relevant employment status manuals.
Partner, Martin Williams, comments: “It is worrying that the CEST tool, even enhanced as it is, is failing to provide clear results in almost a fifth of cases.
“At this stage, the online tool should be something that those within scope of the legislation can rely on to provide them with an accurate assessment of their circumstances and to provide a determination that they can be sure of.
“Clearly, this is not the case and, as a result, there will be thousands of users left worrying about their employment status and the tax consequences that will come with it from April 2021.
“We would encourage those within scope of the new rules to avoid using HMRC-biased tools and instead to seek professional advice, if they are unsure, ahead of 6 April.”
According to HMRC’s freedom of information release, we can expect further CEST tool data to be published quarterly in 2021.
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If you are concerned about the consequences that the new IR35 rules may have for you and your business, contact our team of professionals today. We can discuss your circumstances in more detail with you and assist you with tax planning, should this be necessary.
