Could an enhanced CEST portal make life easier for private-sector businesses facing IR35 reforms?
It’s fair to say that the response of the business community to the coming IR35 reforms has been less than positive. Business leaders have criticised HMRC for a failure to provide clear information, a failure to understand the complexity of the private sector workforce, and pointed to its flawed employment determination tool – CEST. CEST, which stands for Check Employment Status for Tax, uses multiple-choice questions to consider the relationship between contractor and employer, before (in most cases) providing a determination. However, it is far from perfect. A slew of recent BBC cases involving the HMRC have seen CEST get it wrong, while NHS Digital faces a 4.4 million tax bill after HMRC challenged the determinations made by its own tool.
The good news for businesses is that CEST appears to be getting an overhaul. In October, the government provided an IR35 briefing for businesses. This briefing included an announcement about a new version of CEST set to be released by the end of the year. The government has advised that CEST 2.0 will be clearer, reduce user error, and consider more detailed information. This is good news for the private and public sectors, who have vocally criticised the existing setup. However, the government also made it clear that they do believe the existing tool is fit for purpose, saying:
“Customers don’t need to wait for the enhancements to go live: HMRC stands by the results given by the tool now, provided the information entered is accurate and it is used in accordance with our guidance.”
So, what does this mean for the businesses who are working hard to get IR35 ready? Initial responses from industry leaders have been mixed. IPSE Deputy Director of Policy, Andy Chamberlain, said:
“The tool does indeed urgently need to be refined and updated, but in all our talks with HMRC, they have been adamant they will not change it to factor in mutuality of obligation. Therefore we doubt this ‘enhanced version’ will improve matters at all for the self-employed. They still face disastrous changes to their tax system, based on a fundamentally flawed tool. We urge the government to recall and rethink this ill-conceived plan before it is too late.”
While Susan Ball, Employer Solutions Tax Partner at RSM, had an overall more positive response:
“We also look forward to the launch of the new CEST tool before the end of this year, which should help reduce the confusion and errors that we have seen in employment status determinations to date. It is pleasing that HMRC have confirmed that if you use the current version they will stand by the decision if it is completed correctly.”
We will have to wait and see if the new CEST tool offers any greater clarity than the current offering. Or even if its launch is postponed by the coming general election. But one thing is for sure, you can’t afford to wait and see if this updated tool is the answer to all your IR35 questions. You need to start preparing for off-payroll reforms today. To support you through the coming changes, we have partnered with Brookson Legal to provide a complete IR35 solution. Our solution provides not only tailored advice and guidance but protection against HMRC challenges to determinations. Get in touch today to find out how we can help you prepare for April 2020.
Join us at Devonshire Terrace on 20th November at 8.30am to 10.30am to hear from IR35 experts and discover solutions to key off-payroll challenges.