In this article our Senior Contracting Recruiter, Blake Thompson discusses the benefits and drawbacks of using the HRMC's CEST tool for the IR35 determinations.
Get all the details below!
No healthy discussion around IR35 can be had without some grumblings around the HMRC’s ‘Check Employment Status for Tax’ or CEST tool and the lack of clarification it gives to contractors, end-clients and any one who dares try and use it for it’s supposed purpose
But what’s actually wrong with it, and should you trust it to give a true and legally binding IR35 determination? We’ve put together a pros and cons list outlining the key points below:
- The first and most obvious point is that relying on the CEST will leave a lot of room for an incorrect IR35 determination, meaning that even if an assignment should be deemed outside IR35 it may be deemed inside which could lead to the end-client no longer being able to attract a large cohort of the best contractor on the market.
- Mutuality of Obligation (MOO) is one of the key indicators of IR35 status, but surprisingly the CEST tool doesn’t even consider it when making a determination. The reason the HMRC gave for that is that by using the CEST tool you would have already established a MOO. Yes, they really said that.
- When making an IR35 determination it is the role of the entire supply chain to ensure they’re taking ‘reasonable care’ – A former HMRC inspector however has confirmed that using the CEST tool would in their eyes not constitute as using reasonable care. So the HMRC’s own tool leaves everyone exposed.
- Anyone that’s spent any time using the tool understands how difficult it can be to give a determination one way or another, and an indeterminate result just leaves all parties involved more frustrated than when they started.
- A Status Determination Statement is a legal requirement as part of any IR35 determination, but you won’t be able to get one using the HMRC’s CEST tool.
- As part of any assignment it is strongly advised that all parties involved have insurance in place, regardless of how confident they are of an outside IR35 determination, to mitigate any worry at all about HMRC advances. Results from the CEST tool are however completely uninsurable, leaving everybody involved completely exposed.
- It’s Free.
- That’s it. Other than that, we can't see why anyone would use it.
So, what are the alternatives?
There are several options that will provide full Status Determination Statements and that can also be insured to cover the entire supply chain. A few examples are available below:
The only downside compared the CEST tool? They aren’t free. But as you’ve already seen, free in this case isn’t better.
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