Share this content

CEST Tool - is the methodology transparent?

CEST Tool problems

Didn't find your answer?

Following the off payroll working rules extension, currently being implemented, we are having to use the CEST tool a lot to check status.  My suspicion is that the tool parameters appears to have been changed to rely almost solely on substitution for an outside IR35 decision, and that home working using your own computer equipment in your owns hours seems to have been given a very low rating.  I wonder if the scoring system behind the status decision making is public knowledge and whether this has been manipulated over the last year by hmrc.  I ask because I have cases which arrive at "inconclusive" decisions that should in all sense be outside IR35, and when a decision is inconclusive - what on earth are we supposed to do in discussion with an engager? 

Replies (8)

Please login or register to join the discussion.

By Duggimon
13th Apr 2021 09:13

If the individual behind the PSC has no right of substitution I would be 99% certain the arrangement is within IR35. How could it possibly be otherwise? It would clearly be the individual being engaged.

Thanks (0)
Replying to Duggimon:
avatar
By Hugo Fair
13th Apr 2021 12:04

No idea how to quantify the %ages, but it seems unlikely to me that such a simplistic 'rule' would be correct.
What about, say, my appointment of a Quantity Surveyor or a Structural Engineer during a building project. In neither case would I be supplying any of the tools required to do the job, nor prescribing the methodology used or controlling the timing of any activities ... but (if the appointee is the sole such professional in her/his company) I wouldn't accept substitution, not would I expect to find that I had a new employee.
Unless I'm on the wrong track somehow, this 'conundrum' would apply to most of my uses of people in the 'professions' (including for instance a specialist Tax Adviser).

Thanks (1)
Replying to Hugo Fair:
avatar
By Tax Dragon
13th Apr 2021 12:20

Hugo Fair wrote:

No idea how to quantify the %ages, but it seems unlikely to me that such a simplistic 'rule' would be correct.

Which is why, conceptually, no version of CEST can ever be 100% reliable. Without a simple rule, there can be no (universally applicable) simple tool. (And why, incidentally, the thinking behind the OP may be conceptually misguided.)

As for HMRC changing the tool as case law in this area updates.... how dare they?!

Thanks (0)
Replying to Tax Dragon:
avatar
By Hugo Fair
13th Apr 2021 13:17

Tax Dragon wrote:

Without a simple rule, there can be no (universally applicable) simple tool.

Totally agree, which is why CEST is so dangerous - and this is entirely due to HMRC's ludicrous pronouncements:
1. It is based on guidance only = true
2. Employers are responsible for reaching a determination (and keeping a record of how they reached it) = true
3. Employers can rely on the result from CEST = false
[The soundbite in point 3 always ignores the woolly caveats of ... so long as a) you answered all the questions honestly (which is often hard to prove/disprove), and b) only if CEST gives you an unequivocal answer (which is often not the case)].

So we end up with the worst of both worlds ... some employers who rely on CEST (without troubling themselves to understand the underlying requirements), whilst others apply the blanket "you're all in IR35" (to avoid the perceived danger but looking hurt when they find there's now an Appeals procedure)!

What a mess.

Thanks (1)
Replying to Duggimon:
avatar
By ASM59
13th Apr 2021 15:32

I don't agree with you - if someone is engaged for their specialist skills in a particular field, that does not necessarily make them an employee - that is far too simplistic an interpretation. There are many cases of individuals for example in Film and Television who fall within the Schedule D grades which continue to apply post Off Payroll Working Rules and many occupations and professions which are performed by individuals through PSC's where the question of substitution is irrelevant or simply not possible.

Thanks (1)
Hallerud at Easter
By DJKL
13th Apr 2021 11:00

It is ?

Thanks (0)
avatar
By silverghost
13th Apr 2021 11:57

This is not surprising. HMRC did this with the old ESI for ages before being embarrassed into adding version numbers.

Thanks (0)
avatar
By Guilford Accounting
15th Apr 2021 10:03

There is far more to a determination that substitution. Mutuality of obligation and supervision are just as important.

I have just received a contract from client for comment which is clearly written to exclude the contractor from the off-payroll rules which includes clauses on supervision, autonomy and interestingly accounting and paying tax. Some engagers are clearly being sensible.

Thanks (0)
Share this content