Why CEST isn’t best
If you’re a recruiter or an end client who works with contractors, IR35 can’t be far from your mind as we head towards 2021. You might be looking at ways to ensure you don’t fall foul of the new rules, and deciding what systems and procedures you’ll have in place to evaluate a contractor’s IR35 status. One tool you may be considering is the offering from HMRC themselves – called CEST (short for “check employment status for tax”).
On the face of it, this seems like smart thinking: the tool is free, automated, easy, and produced by HMRC themselves, so it couldn’t lead you far wrong, right?
Unfortunately, there are several factors that we think mean CEST isn’t best. This article gives a rundown of some of the major flaws in the automated tool – and why we think the hybrid Kingsbridge Status Tool is a safer, better option for end clients and recruiters who are looking for IR35 solutions.
The CEST tool is fully automated, and in this lies its major flaw. From the contractors we’ve been speaking too, we’re seeing high numbers getting “indeterminate” results, which is, well, not actually much use at all, really! There’s no way to feed more detail into the tool, and if your result is undetermined, you’re instructed to call or email HMRC. Obviously, not everyone will feel comfortable having this discussion with HMRC themselves, and most contractors and end clients would rather get an impartial judgement.
The Kingsbridge tool is different. Because we’re the only hybrid tool on the market, and we know that IR35 cases can be complex, we give every borderline case that the automated system throws up to one of our team of (human) experts, who will do a deep dive into both the contract and working arrangements in order to produce an informed view of the status. Even in a complex case, we’ll provide you with an answer within 5 working days – and the evidence that you have taken reasonable care in getting to your status determination.
It overlooks MOO
MOO (or Mutuality Of Obligation) has absolutely been the deciding factor in a number of private sector IR35 cases that have gone to court. That’s why we find it a bit odd – and ever-so-slightly biased – that MOO is taken-for-granted in the CEST. In the CEST tool, HMRC takes a very broad view of what constitutes mutual obligation, claiming that the existence of a contract in itself is enough to prove that MOO exists. However, the law has been interpreted in a much more nuanced way in many of the IR35 tribunals. For example, short-term engagements, with no obligation to provide work in between, or engagements where a contractor would not be paid if they chose not to complete the work, have been found to be outside IR35, because of the lesser level of obligation than would be expected in an employee/employer relationship.
Not enough questions – and confusing wording
Although a recent update to CEST means that it now asks more questions than it used to, these still don’t cover the nuances of many contracting relationships. With a legislation as complex – and as important – as IR35, we’re not convinced this is enough. When end clients produce a status determination, they are putting themselves on the line. So, in our minds, you are going to want to be sure that you’ve examined every aspect of the contract and working practices. You’re also going to want to be confident that anything that might be brought into play in a potential HMRC battle or employment tribunal has been considered. CEST simply doesn’t cover enough ground to do this. Users have also complained that the wording on some questions feels repetitive and confusing, as if it is designed to trip people up.
In contrast, the Kingsbridge Status Tool asks between 29 and 34 clearly worded questions, concerning the specifics of your contract and working arrangements. From this, we can produce an indicative assessment of status within minutes. As mentioned above, any borderline cases will be reviewed by someone with expertise in this area. They will explore the answers you’ve submitted, look over the contract and have a conversation with you to ensure they fully understand the working relationship before making their suggestion.
Give CEST a rest
HMRC themselves even called one contractor’s CEST result “irrelevant”, and tried to have it dismissed from evidence in a recent public sector IR35 tribunal. So, if they haven’t got confidence in it, it certainly doesn’t make us keen to pin contractors’ livelihoods, and end clients’ and recruiters’ legal battles on it. That’s why we’ve developed our own tool; a quick, reassuring, expert assessment of IR35 status. By combining a carefully crafted questionnaire with the bespoke advice of our experienced team of legal brains, we’re able to offer a complete IR35 solution that supports every stage of the contracting supply chain. If you’re keen to give CEST a rest, then you can sign up for your own personal demo of the Kingsbridge Status Tool today.