CEST assessment rejected by judge

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Contractor Tony Elbourn can look to reclaim thousands of overpaid taxes after proving that he was working outside IR35. An employment tribunal heard Mr Elbourn’s case and ruled that he was self-employed.

The decision came about from the contractor disputing his classification of being inside IR35 by HMRC’s CEST tool.

Mr Elbourn originally appealed to the tribunal about an unlawful deduction of wages while he was engaged by the Qualserve Consulting Ltd agency, whose end-client was the Met Office. He had National Insurance contributions deducted from his wages, which he claimed should not have occurred.

However, Mr Elbourn lost his case, as the tribunal ruled that he was not an employee or a worker but was in fact self-employed. This meant that IR35 rules did not apply to his engagement.

While Mr Elbourn may have lost his appeal, it did establish his employment status and give him grounds to reclaim tax that the agency and client had deducted from his wages. They took an estimated £9,500 from his income because he was “employed for tax purposes” under the Off-Payroll rules.

Qualserve made the decision to tax Mr Elbourn as an employee on the basis of a CEST assessment that found that he was within IR35. At the tribunal, the judge rejected this evaluation and said: “He [Elbourn] was given a project, and apart from a weekly meeting to check on progress, he was his own master.”

The ruling should encourage other contractors who have overpaid taxes to reclaim their money.