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IR35 status check failing to deliver in a fifth of cases

HMRC’s enhanced version of the check employment status for tax (CEST) tool is failing to make a determination for one in five off-payroll (IR35) workers, according to HMRC’s statistics.

Reforms to off-payroll working regulations, known as IR35, are set to be introduced to the private sector in April next year.

The latest version of CEST was released in November 2019 following criticisms that it failed to provide adequate support to help employers and contractors determine employment status.

However, statistics for the operation of the enhanced tool over the period 25 November 2019 to 24 November 2020 show that, of 975,416 CEST uses, in 188,719 cases the outcome was ‘undetermined’, meaning that in 19% of cases employment status was not clear.

During the same period over half of those using the tool were judged to be outside off-payroll working rules or were classed as self-employed for tax purposes. In addition, 29% were found to be inside off-payroll working rules or employed for tax purposes.

In a statement, HMRC said: “CEST produces a determination in the vast majority of cases and HMRC stands behind every result it gives, provided the information is accurate and it is used in accordance with our guidance.

To reach a conclusive result in a greater proportion of cases we would need to add in more complex questions, which would add difficulty for the majority of users.

In more finely balanced cases, CEST is expected to provide an undetermined outcome and HMRC has provided detailed guidance and dedicated support to help customers make status decisions.”

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