IR35 tool fails to deliver result in 19% of cases

With reforms to the off payroll working regulations set to be introduced to the private sector in April next year, HMRC’s online tool for determining IR35 status has failed to produce a definite answer in almost one in five cases over the past year

HMRC launched an enhanced version of the check employment status for tax (CEST) tool in November 2019, following criticisms that it failed to provide adequate support to help employers and contractors determine employment status.

However, published 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 of cases the outcome was ‘undetermined’, meaning that in 19% of cases employment status was not clear.

In comparison, over the year, more than half of those using the tool (52%/505,598) were judged to be outside off-payroll working rules or self-employed for tax purposes, and 281,099 (29%) were found to be inside off-payroll working rules or employed for tax purposes.

HMRC said it had worked with more than 300 stakeholders to make the tool clearer, reduce user error and consider more detailed information.

When CEST cannot provide an answer, users are told to check the information they have inputted, referred to the employment status manual and given a HMRC phone number and email address they can contact.

In a statement, HMRC said: ‘CEST produces a determination in the vast majority of cases and HMRC stand 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.’

CEST usage statistics

Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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