COMPLIANCE
CEST – new improved
John Harling, principal employment taxes consultant at PSTAX, reviews
O n 25 November 2019, HM Revenue & Customs (HMRC) finally issued an updated version of its online tool Check Employment Status for Tax (or CEST) to help engagers establish if individual workers and personal service companies could be paid off- payroll or under deduction of pay as you earn and National Insurance contributions (NICs). Despite much evidence to the contrary, HMRC had until that date claimed that there had been no previous updates since March 2017. However, the tool has now been subject to a significant update that is more far-reaching than perhaps many were expecting. Users of the CEST will note that parts of the tool will still have a familiar feel in terms of the questions asked. However, there have been changes to the layout – and, to some extent, the ordering – and also some quite fundamental new questions that had previously been left out. As many will know, there are various permutations that can arise depending on how certain questions are answered. They certainly cannot all be considered in one relatively short article, but we have considered the main ‘headlines’ below taking into account the main headings used in the tool. HMRC disclaimer A whole page is dedicated to warning users that whilst HMRC will stand by the result of the CEST where questions are answered accurately it will not do so where contrived arrangements are in place to achieve a particular outcome.
user is considering whether the IR35 off-payroll rules relating to intermediaries apply. Even if this is inadvertently answered to say that they do not apply, there is a further question to clarify whether a limited company or partnership is engaged. If it is, the user is then directed to read further guidance on the IR35 rules before proceeding. (‘IR35’ was the number of the HMRC press release that introduced new tax rules for intermediaries.) Office holders As before, HMRC asks if the worker is an office holder – usually a permanent statutory appointment – and, if so, this will lead to a result of employed for tax/NICs purposes or inside IR35. Personal service/substitution This section of the CEST had already been updated in the past few months, so there are no major surprises here regarding the wording of the questions. However, in considering whether the end-user has the right to reject a substitute, it does ask whether this applies even if the person meets the end-user’s “interviewing, vetting and security clearance procedures”, which is a change of emphasis from the way the wording was set out previously. However, the key point to stress is that there remains a ‘high bar’ threshold to reach in depending on how certain questions are answered ...various permutations that can arise
being able to demonstrate a genuine right of substitution.
Control The questions relating to what, how, when and where the work is undertaken are not materially different. As before, they remain a crucial consideration, particularly in cases where personal service is clearly required and there is an obvious lack of financial risk. Financial risk There are some changes to the layout here with separate questions relating to materials, equipment, vehicle provision and other significant expenses, as opposed to the previous version which included them all on a single page. The wording of the question in each case has been updated to ask if the worker will have to incur the cost of any of these before the end-user pays them. Additionally, in respect of the questions about the requirement for the worker to put right unsatisfactory work, this includes the option “Yes, unpaid but their only cost would be losing the opportunity to do other work”, which is a change from the previous wording. This emphasises the point that HMRC will only really accept that there is a requirement to put right unsatisfactory work where the workers has to physically incur a cost, e.g. a builder having to pay for new materials where the original work has not been undertaken satisfactorily. Integration Most of this section has a familiar feel to it regarding whether the worker has line management responsibilities for the end-user and how they might introduce themselves to those who are the users
Does IR35 apply? The tool asks at a very early stage if the
| Professional in Payroll, Pensions and Reward | February 2020 | Issue 57 24
Made with FlippingBook - Online magazine maker