Recent figures concerning HMRC’s Check Employment Status for Tax (CEST) tool show that thousands of contractors may have received wrongful tax treatment and may have grounds for an appeal. This serious error is thought to be a result of unlawful blanket assessments carried out by public sector employers.
HMRC did not give up its figures easily, however, and the organisation blocked several earlier Freedom of Information (FOI) requests. Ultimately, it was not forthcoming about this data until the Information Commissioner’s Office became involved.
The figures show that more than half of the assessments conducted using the CEST tool resulted in the decision that IR35 did not apply to the contract. However, many public-sector employers have found that it is virtually impossible to secure a contract outside of IR35 regulations. This is largely due to the blanket assessments that many public-sector bodies carry out. These findings raise further concerns over the accuracy of the tool and the chaotic implementation of IR35 public sector reforms.
Contractors are not the only ones who have issues with the CEST tool. Just days before HMRC released its figures, the Institute of Chartered Accountants in England and Wales (ICAEW) wrote to the Treasury to say that the tool was not suitable for private sector use.
The figures from HMRC reveal that in 54% of cases, the CEST tool ruled the contract to be outside of IR35. Another 31% were inside IR35, and 15% were indeterminate.