Payroll
had all the information necessary to be able to answer the questions posed by CEST. CEST asks whether the engaging client knows the worker. If the answer is no, the range of questions will differ in recognition that not all information will be known. Information needed to complete CEST A certain amount of information will be needed before the questions within CEST can be answered, including: ● the contract details ● the responsibilities of the worker ● who will decide what work needs doing? ● who will decide when, where and how the work is done? ● on what basis will the worker be paid (e.g. hourly, weekly, by task, a fixed rate for the job)? determination even where the worker is not known, but fewer questions will be asked in this instance and it may require a revisit once the worker is known. If a worker is completing CEST they will be asked whether they are making a new determination or checking a determination. CEST assurances HMRC continues to provide assurances where the information input accurately reflects the working relationship i.e. the contractual terms reflect the actuality. Where the contract working practice changes, it is recommended that CEST be revisited to see whether the original decision is still valid. GOV.UK makes clear, however, that “HMRC will not stand by results achieved through contrived arrangements that have been deliberately created or designed to get a particular outcome. We would see this as deliberate non-compliance, and you risk financial penalties.” At the conclusion of the questions within CEST, which will vary according to the answers given in the preceding questions, a list will be provided that details the answers given and provides the user with the opportunity to change the answers, if change is needed. This information is not stored by HMRC and at ● whether there are any corporate benefits that come with the task ● are expenses be reimbursed? CEST may still be able to form a
this point is entirely anonymous; however, a print- out is available and additional information can be added at this stage, such as: file name, contract or role title, your name, client’s name, and other information. Completion of this is entirely optional, and at this point the user can print out the results and/or save as a PDF in line with the engager’s usual processes. If CEST is not used, the document provided should show sufficient information to help the worker and feepayer understand how the engager arrived at their decision, and where any of the answers are questioned, provide evidence of reasoning. ...terms are important, but so is the day-to-day reality ... Factors to consider The question under consideration when making a status determination is whether the worker is delivering their work through a contract of service – which would indicate employment – or under a contract for services – which would indicate self-employment. The factors that are considered were cemented in 1968 in the case of Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance (http://bit.ly/37iMDlS). CEST considers all of the main factors that we would expect which include: ● can the worker send a substitute to deliver the work who they will pay or employ ● how will the worker be paid (i.e. by the hour or by the task)? ● control over how and where the work is done ● financial risk to the worker (e.g. putting right mistakes at own expense, delivering the task no matter how long it takes) ● the payment of overtime and bonus ● how integral is the worker to the organisation (e.g. do they appear to be an employee with a company email address, attendance at staff events, management of staff)? ● who provides the materials to do the job (which would no longer include items such as a phone or computer)? ● continuation of work (i.e. is this contract
one of many with this worker) ● is the worker free to choose to work for other clients and, if so, do they need permission from the client? Contractual terms are important, but so is the day-to-day reality and the two need to agree. A particular issue in determining worker status is ‘mutuality of obligation’ (MOO). HMRC believes that MOO must exist for a contract to be in place and so does not consider it as a separate question within CEST. In its Employment status manual (http://bit.ly/2TM1hhx) HMRC explains that: “Only when the basic requirements for mutuality of obligation have been identified is it possible to then consider whether the contract is a contract of employment or a contract for Services (self-employment). “The basic requirements as to the mutual obligations necessary to determine whether there is a contract in existence at all are: that the engager must be obliged to pay a wage or other remuneration, and that the worker must be obliged to provide his or her own work or skill. “These basic requirements could be present in either a contract of service or a contract for services and, on their own, will not determine the nature of a contract.” Professional observers continue to challenge the approach that HMRC has taken within CEST on the issue of MOO, citing various legal rulings to evidence their arguments. In turn, HMRC cites further rulings – and so the arguments continue. However, HMRC states that where CEST is completed fully and accurately, and the answers given “reflects the actual, or expected working practices” it will stand by the result. What next? It is not expected that CEST will be able to make a determination in all cases, as this is a complex subject. Time and use will determine how many times this particular outcome will occur. In addition to guidance that can be found in the new section within HMRC’s Employment status manual, HMRC provides a specialist helpline service which can be accessed Monday to Friday 8.30 until 4.30 on 0300 123 2326. The message to everyone who thinks they may be impacted by off-payroll reforms is ‘be prepared’. C’est la vie – that’s life. n
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| Professional in Payroll, Pensions and Reward |
Issue 57 | February 2020
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