29 Sep Determining Your IR35 Status – What Should You Do if You Think CEST is Wrong?
The Government’s Check Employment Status for Tax tool, CEST, has come under some criticism over recent years, with claims that its determinations are inaccurate, generalist, or simply incorrect. However, if you’ve chosen to work as a contractor you’ll have to go through the process in order to determine your tax status. Here we look at what you can do if you think what CEST says is wrong.
Why is CEST necessary?
The online CEST tool was introduced in 2017 to enable contractors and their end-clients to determine exactly what employment status they have so that they pay the right amount of tax on assignment. April 2021 brought considerable changes to the ‘Off-payroll’ working rules – otherwise known as IR35. Prior to this it was the responsibility of the contractor to provide proof of their employment status, but after this date it became the responsibility of the end-client.
While clearly it’s important that everyone understands the status of contractors, CEST hasn’t proved the success that the Government hoped it would. There have been several high-profile cases in recent years involving Government departments being fined for IR35 non-compliance amongst its own workers after using the CEST tool.
What can you do if you think CEST is wrong?
It can be frustrating if you’ve been through the CEST process and you think your status determination is wrong. If you think that CEST has given you a determination that you think is wrong there are several courses of action available to you.
In the first instance you or your end-client can re-submit the information into the CEST tool, making sure that all the information you submit is absolutely accurate – any mistakes or erroneous information may have led to an incorrect determination. In theory, this should lead to the outcome that you require. HMRC will respond to a ‘client-led’ disagreement process within a stated 45-day period.
Failing this, and if you are still deemed to be inside of IR35, or your status is undetermined, you can appeal. HMRC has a helpline – 0300 123 2326 – which should provide you with further information on how to proceed.
If you need to escalate the appeal you may consider HMRC’s ‘Alternative Dispute Resolution’ (ADR) process. This will mean that your case will be heard independently by a tax expert working on behalf of HMRC and mediated by an impartial official who has had no previous involvement in your case.
If this issue is still not resolved, you may choose to further escalate the dispute by taking your case to an IR35 Tribunal. This will involve a court case and all the costs that such activities cost, so should only be considered at a very last resort.
Before you get to court, you may also consider an independent IR35 contract review. This will involve a thorough assessment of your case by a specialist adviser who will offer their opinion on your status, your contract of employment, any changes you can make to your CEST tool input etc.
However, before you go down any of these potential avenues, it’s always worth speaking to one of our experienced and knowledgeable customer service team who might be able to offer you advice about what to do next. We’re not legal experts but we have had a considerable amount of experience in dealing with both HMRC and contractors over the last 18 years, and are always happy to share what we know in order to help you.
If you need impartial and informed advice about any aspect of your CEST determination you can call us on 0800 084 3058, email us at email@example.com, or simply fill in the contact form here.