Payroll insight
service. This would appear to be misleading as the true test relates to the right of the worker to provide a substitute, regardless of whether the end-client agrees. The fact that the end-client may not agree is only relevant if the end-client has that right in the first instance. If the third response is selected, the tool moves to the ‘right to reject’ question and then, if ‘No’ is selected, to the ‘who pays the substitute’ question. If the worker’s business pays the substitute, then the tool confirms an ‘out of scope’ outcome. However, the wording on the tool has changed. It used to advise that, if HMRC investigates, it will be necessary to show that there has been substitution in practice. This was an illogical statement given that the person completing the tool has already responded ‘it has not happened’ to the question regarding substitution. The revised response states “If HMRC investigates this engagement, the end- client will need to confirm that they would accept substitution. They may also be asked to demonstrate that they have accepted substitution during this, or a similar, engagement.” Where the person completing the CEST
tool has stated that the engagement has not yet started, the tool goes straight to the ‘right to reject’ question, as previously. ...intention is to discourage end- clients from trying to achieve ‘out of scope’ outcomes... ● ● Control – These questions appear to be unaffected by the recent revisions to the CEST tool. ● ● Financial risk – Before these most recent changes to the CEST, the positive responses to the question “What does the worker have to provide that they cannot claim as an expense…” would all have resulted in an ‘out of scope’ outcome. However, the tool now distinguishes between the four answers. Where “materials” or “equipment” are selected, the tool confirms an ‘out of scope’ outcome. However, where “vehicle” or “other expenses” are selected, the tool continues to the remaining questions. It is difficult to determine to what extent the outcome is affected by these two latter
responses. Completion of the tool to the end, with ‘standard’ out-of-scope answers, seems to result in an ‘Unable to determine’ position. ● ● Integration – These questions appear to be unaffected by the recent revisions to the CEST tool. Summary By way of summary, the changes to the tool made by HMRC are not only ‘unannounced’ but also have a significant impact on the CEST outcome. Consequently, it is much more difficult to conclude ‘out of scope’ based on financial risk. The changes to ‘personal service’ are more neutral and, on balance, justifiable given that the intention is to discourage end-clients from trying to achieve ‘out of scope’ outcomes based purely on the ‘substitution’ question. In conclusion, end-clients and fee-payers are advised to review both tax status policies and CEST procedures well before April 2020 to ensure they are prepared for the changes to come into effect next year. The government has pledged to legislate for employment status and, therefore, we can expect many more changes in this area over the coming years. n
Have your say on the future of the CIPP AGM19
5 December 2019, London
Voting will open on 2 November 2019 to elect candidates nominated to join the board of directors for the CIPP. Board directors represent members views and influence the strategy and direction of the CIPP, therefore it is important that you, as members, vote for who you feel can best represent you.
View the candidates and vote online at cipp.org.uk/AGM
You will be most welcome to attend the AGM on 5 December in London where you will have the opportunity ask the current CIPP board questions about the financial accounts (which will be available by 2 November) or about the direction of the CIPP. Please book your place online at cipp.org.uk/AGM
Attendance at the AGM is free for CIPP members. Should you wish to attend, please book via our website at cipp.org.uk/AGM
@CIPP_UK cipp.org.uk
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| Professional in Payroll, Pensions and Reward |
Issue 54 | October 2019
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