With less than three months remaining before the IR35 off-payroll working rules begin to apply in the private sector, HM Revenue & Customs (HMRC) has launched a revamped ‘Check Employment Status for Tax’ (CEST) IR35 off-payroll working tool.
The rule change means that instead of the contractor having responsibility for determining their employment status for tax purposes, the engager will need to make that decision. If an engagement is found to fall within the rules, the engager will be responsible for applying the correct tax and National Insurance contributions (NICs).
CEST is the tool that, until now, workers have used to determine the applicability of the IR35 rules to an engagement and which will now be used by engagers.
The tool has attracted significant criticism in the two years that it has been available for failing to reflect accurately the nature of a contractor’s work – proving to be accurate in only 85 per cent of cases.
HMRC has now updated the tool with a number of additional questions.
HMRC told Accountancy Daily: “CEST was rigorously tested against case law and settled cases by officials and external experts.
“It is accurate and HMRC will stand by the results, provided the information input is accurate and it is used in accordance with our guidance.”
Rob Chedzoy, Tax Partner, said: “There are only a few months left until the introduction of the off-payroll rules and so it is essential that businesses take the time now to identify those affected by the extension of the rules into the private sector.
“This is a landmark change to the way that many contractors and consultants are taxed and how their income is reported.
“Unlike previous rules, the engager will have the ultimate responsibility for making the decision over employment status. In some cases, it may be feasible to review and adjust the contractual arrangements to position the contract as one of self-employment.
“It is worth noting however that HMRC will not stand by CEST results achieved through contrived arrangements that have been deliberately created or designed to get a particular outcome.
“Hopefully, this revamped tool will help employers, but it is important that they also seek independent advice. To find out how we can help you with IR35, please contact us.”