A brief background for the uninitiated: The CEST tool is HMRC’s ‘answer’ to companies, and contractors who want to assess the IR35 status of an assignment. I say ‘answer’ because the only thing it does answer is that the HMRC doesn’t care if you get a real determination or not through their tool. Many contractors, and end clients have been misled into thinking that use of the tool is either compulsory or their only option, neither of which is true. Contractor Calculator, alongside employment Status experts completed multiple assessments on the tool and found that it gave results that differed to the outcome of IR35 tribunal hearings cases that had already happened.
I appreciate this isn’t a solution for every situation, you’re going to get some clients who are definitive in their case of a role being inside IR35, there’s no magic wand for that unfortunately. This is for the situations where you are being brought to the table as part of the supply chain.
Picture the scene, if you will. It’s a sunny day in April-2021 (I appreciate it being sunny in England, in April is hard to imagine, but bear with me) and you’re in talks with your agency or the end client about the IR35 status of your assignment. And then they say it:
“We’ll run the assignment through the CEST tool and see what it says, then we’ll know what to do”
Oh, brilliant.
Well, because you’ve read this article you won’t just have to roll over and nod because you’ll know that:
- Incorrectly deeming a role Inside IR35 based on the outcome of a CEST assessment will mean that the end client will no longer be able to attract the contractors they need to complete their important project on time, which will lead to a knock-on effect on their project and the company’s turnover
- The CEST tool isn’t fit for purpose as it completely omits several employment status factors including one of the most important factors in a determination, Mutuality of Obligation (MOO). So even if they do get an outside IR35 determination, it won’t have a key point factored in
- It is the only tool that is completely uninsurable for the supply chain, why not consider an alternative that means should the HMRC come knocking everyone will be covered?
- The CEST tool doesn’t provide a Status Determination Statement, the provision of which is a legal requirement as part of an outside IR35 determination
- The end client is obligated to take ‘reasonable care’ as part of their decision-making process with IR35, but due to the factors outlined above it has been confirmed by a former HMRC tax inspector that using the CEST tool does not constitute taking reasonable care
- The CEST tool will often give indeterminate results leaving you neither here nor there, where as an independent assessment will give you an answer either way
Here’s what you can suggest as an alternative:
- There are several insurance backed ways to get IR35 determinations for an assignment, a few examples of these are:
Whilst there is an associated cost with using these tools or platforms, the money saved by getting a true outside IR35 determination will vastly outweigh the small initial cost for all parties involved. And by using an independent tool the end client is showing that they are using ‘reasonable care’, something they are legally obliged to do with any IR35 determination, and something they cannot do by using the CEST tool alone.
I think it’s worth closing this post with a couple of potential home truths: Not all roles are going to be outside IR35, if you are essentially doing the job of an employee, in all likelihood you’ll be treated like one with an inside IR35 determination.
However, if you’re working on a true contract for services basis then completing an assessment to achieve an outside IR35 determination will be the best, and cheapest overall option for all 3 parties involved. You’re going to have to be consultative and speak to the agency and end client about why this benefits them, and hopefully the points above will go some of the way to doing that.
If you have any questions feel free to contact us at [email protected] or call 0161 833 1044.
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