MOO’ve over CEST Brookson are Here to Help
It is fair to say that the changes to the IR35 rules in the Public sector in 2017 shook the contracting world. In an attempt to limit the aftershock that followed, HMRC offered a solution: a tool designed to help hirers reach an accurate outcome as to whether IR35 applies to an engagement or not. With the changes now being rolled out into the Private sector, does the CEST tool offer a feasible solution to Hirers?
CEST, a Tool to Help?
The CEST (Check Employment Status for Tax) tool promised a simple, straightforward and reliable solution to deal with an otherwise complex area of law, a welcome announcement to hirers. HMRC went even further to confirm that they will stand by any result provided by CEST where the information inputted is accurate. However, two autumn budgets and one Private sector announcement later, CEST has done little more than increase confusion, controversy and the need for a clearer answer.
The sole purpose of the tool, and IR35 in general, is to consider whether the relationship between the worker and the hirer would be one of employment if the worker was not working via an intermediary, usually a Personal Service Company (Limited Company). The 2017 changes placed this responsibility on the Public sector hirer, changes that will affect the private sector from 2020.
With great responsibility comes great liability and if a hirer gets this wrong, it could leave them with a hefty bill. The promise of a tool to assist in reaching an outcome was exactly what the Public sector needed, unfortunately, CEST seems to have fallen short of providing hirers with much needed certainty over IR35 status.
A Red Card for MOO
The question of ‘what is an employee?’ has been developed over many years based on factors and tests set out in case law. It was therefore a surprise that when CEST was developed one the key employment status indicators, Mutuality of Obligation (MOO), did not make the cut.
The recent tribunal case PGMOL v HMRC which considered the employment status of Premier and Football League referees, highlighted the lack of MOO is still an indicator of self-employment. Despite being left out of the IR35 squad by HMRC it is clear Employment Tribunals view Mutualtiy of Obligation as playing a pivotal role.
HMRC have confirmed that they are looking to improve the CEST tool ahead of April 2020. On the back of much publicised criticism it appears that HMRC may have conceded that the decision to omit MOO from CEST may need to be revisited and some form of MOO questions are is likely to be included within future developments of the CEST Tool.
CEST’s Conversion Rate
HMRC have acknowledged that although the CEST tool will correctly assess an engagement in most cases, it cannot give a conclusive outcome on all cases. This has been a headache for many Public sector hirers who have received an inconclusive outcome. The main issue here is that this affects the most complex cases where hirers need the most help and with the changes rolling out into the private sector in 2020 this problem will only grow larger.
At Brookson we believe there is always a better way. We understand that determining employment status is a complex assessment requiring professional, specialist knowledge and experience to undertake reliably. Brookson Legal Services offer a service that is both user-friendly and can assist you in making decisions for those workers who are not clearly inside or outside of IR35.
Brookson Legal Services are an SRA regulated law firm who have 18 years’ experience in helping contractors navigate through the IR35 legislation and have a team of advisers who have sat on HMRC IR35 forums. For more information on how they can help you overcome the challenges posed by IR35 get in touch today.