Check Employment Status for Tax (CEST) usage data released on 24th June reveals that 210,100 contractors have been returned an undetermined employment status.
Government data which was released in line with Freedom of Information rules, shows that between 25th November 2019 and 31st May 2021 the tool delivered the following outcomes:
|Worker Using an Intermediary||Outside off-payroll working rules (IR35)||Inside off-payroll working rules (IR35)||Undetermined||Total|
The undetermined figure represents a hefty 21% of all CEST users during the timeframe. This high rate of inconclusive results is not anything new, however. During the first reporting period November 2019 to November 2020, CEST failed to deliver a verdict in 188,719 of cases out of 975,416, an inconclusive rate of 19%.
The government data shows an increase in usage in the lead up to the original private sector IR35 reform date, with 462,925 uses in February and March 2020. Unsurprisingly, usage peaked again in March 2021 ahead of the delayed implementation of reform, which was introduced on 6th April 2021.
What does this mean?
The updated data proves consistent uncertainty for contractors and businesses alike as the CEST tool continues to deliver undetermined results. 1 in 5 contractors are left with their employment status undecided, a figure which is viewed as unacceptable by many industry experts.
Many businesses are left to seek out external help from status experts to provide a ‘human’ review of the case at hand. While this practice may be more accurate and provide comfort of supporting evidence, involving legal consultants can be both a costly and timely practice which can cause delay and disruption to contracts.
History of the CEST tool
The CEST service was introduced in 2017 ahead of the public sector IR35 reform to assist employers, hirers and workers to determine the employment status of the worker and therefore ensure the correct tax and National Insurance is paid. In 2019 HMRC undertook an improvement project in the lead up to private sector introduction of the reform, these changes were published on 25th November 2019.
Also in November 2019 it was reported NHS Digital had been landed with a £4.3m tax bill for the period April 2017 – December 2018 after using the CEST tool to determine the employment status of many workers. Even though the organisation undertook a ‘considered assessment of the status of each individual contractor’, HMRC decided that the assessment tool had been used incorrectly.
It’s long been the opinion of many professional bodies that CEST is a fairly rudimentary digital tool that relies on set questions and answers to achieve its verdict. Both the Taylor Review and the Lords Report found that the CEST tool does not reflect the complexities of modern working practices, which are highly complex and subject to a great many variables. Rather than allowing contractors to input details that relate to the individual circumstances of their contracts, the tool uses a formulaic approach to achieve a result without thorough evaluation.
This content has been supplied by IR35 Guru
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