IR35 check employment status for tax (CEST) tool

30 April 2018

An article from Accounting Web indicates that public sector bodies are ignoring the results of the HMRC employment status for tax (CEST) tool and may have deducted incorrect amounts of tax and NI from contractors.


From 6 April 2017 changes came in to affect to the way intermediaries legislation (IR35) is applied to off-payroll working in the public sector. Responsibility for operating the off-payroll working rules, and deducting any tax and NICs due, moved to the public sector body, agency or other third party paying an individual’s personal service company (PSC).

HMRC provided the new CEST tool to be used to find out if a worker on a specific engagement should be classed as employed or self-employed for tax purposes. HMRC will stand by the result given unless a compliance check finds the information provided isn’t accurate.

According to the Accounting Web article a freedom of information (FOI) request revealed how many times the CEST tool was used at its peak between March and October 2017 which indicated that the service was certainly being used by public sector bodies. However the CEO of the company ContractorCalculator who made the FOI request is reported as saying that despite CEST’s advice, many hirers have been taxing contractors as employees, ignoring the results in many cases.

The full article is available to read here; it has received some interesting commentary from readers which can be viewed at the end of the article.