It may not make each contractor’s bedtime studying listing, however the minutes from a March 2024 assembly of the UK’s Employment and Payroll Group reveal {that a} new query has been added to the federal government’s IR35 standing testing software — CEST, writes Nikola Nowak, senior marketing consultant at Markel Tax.
A brand new (non-obligatory) probe faces these utilizing the federal government’s IR35 software
It’s an non-obligatory query and options at first of the web questionnaire. And earlier than we have a look at the query itself, on your reference, the Employment and Payroll Group is HMRC’s discussion board for discussing and addressing points surrounding the administration of employment and tax.
The discussion board is staffed by each tax advisers/ consultants, a bit like us, and tax officers.
So what’s the new CEST query? It’s, in impact, a probe concerning the commerce sector of the engagement in query. The query is:
What job position are you utilizing the CEST software for?
The query provides the CEST consumer (‘hirer’ or ‘employee’ which you must choose on the display screen earlier than it) a a number of selection reply within the form of 10 totally different sectors. These sectors embody IT, Engineering, Communications, Building, Skilled Companies and; the sector many CEST customers who’re staff would possibly now choose they work in, “Desire to not say.”
Ought to contractors reply the brand new CEST query?
The query is non-obligatory, so there aren’t any repercussions for not answering it.
HMRC has confirmed (within the assembly) that responses to the query is not going to make a distinction to the standing dedication which CEST arrives at.
Might the info collected in reply to the brand new CEST query be used in opposition to the consumer?
By their very own admission, HMRC has acknowledged that they don’t seem to be in a position to hint outcomes again to a selected consumer.
In different phrases, the info they acquire is anonymised. As such, I can’t see how HMRC might use the info in opposition to the taxpayer utilizing it.
The PAC could have impressed CEST’s new non-obligatory query
My suspicion is that this new CEST query is a direct results of the Public Accounts Committee report which beneficial, amongst different issues, that HMRC assesses the affect of the IR35 reforms in numerous sectors.
The advice got here after the PAC discovered that HMRC’s strategy to IR35 was vulnerable to “deterring respectable financial exercise” — a well-founded concern.
The PAC advised that higher understanding by HMRC is required about the usage of contractors in numerous sectors.
My perception is that the CEST software might be a comparatively straightforward method to seize this type of sector-specific info, by giving HMRC the power to observe the frequency of CEST utilization in numerous sectors. They could even have a look at the charges of ‘move’ and ‘fail’ determinations within the 10 listed industries.
How would possibly HMRC use CEST knowledge collected from its new sector-specific probe?
Cynically talking, it’s not exterior the realm of risk for HMRC to make use of this info for focused campaigns, i.e. trying into sectors related to increased charges of ‘inside IR35’ determinations to see if these determinations are being utilized in actuality. However we can’t be sure whether or not the mixture knowledge they use will present such distinction.
At current although, HMRC isn’t even in a position to see which customers are repeatedly utilizing CEST till they get the result they want. The newly added query is only for “higher consumer perception for HMRC”, the conferences’ minutes state.
CEST questions are below assessment
The web report of the March assembly provides that HMRC is reviewing the wording of a few of CEST’s questions “to enhance readability”. And that is a part of a wider enchancment to CEST. The truth is, along with including hyperlinks to related steering, HMRC have confirmed {that a} new CEST platform is now operational, offering them with “higher analytical knowledge about how the software is used”.
What’s subsequent for CEST? Hopefully it’s a Mutuality query
Whereas all these enchancment are welcome, the change we’re all actually ready for is the inclusion in CEST of the Mutuality of Obligations take a look at.
At present, there aren’t any questions within the software regarding this key issue, as a result of HMRC takes the view that the place a contract exists between two events, the issue of MOO will probably be current. This isn’t what case universally legislation tells us and this is likely one of the major the reason why we warning relying solely on CEST output. That’s a stance we take which clearly isn’t going to be affected by the addition of a brand new CEST query, particularly an non-obligatory query and particularly a query unrelated to Mutuality.