Is HMRC’s misfiring IR35 engine about to cause a pile-up, asks Dave Chaplin.
Suppose your car engine repeatedly misfires after years of maintenance neglect, making it unsafe to drive. You pop it into the garage, but instead of the mechanics lifting the bonnet and fixing the engine, they repaint the vehicle and claim it’s in much better shape. Would you be happy with that service? Probably not.
Well, that’s the direction HMRC are heading after neglecting the underlying engine in their Check Employment Status for Tax (CEST) tool for years, having failed to deliver on its promise to Parliament to keep it updated with the law. Although the Court of Appeal laid down binding legal principles a year ago, highlighting that CEST’s logic was wrong, CEST has not been fixed.
Instead, rumours are that CEST will receive a lick of paint but that the decision engine will stay tuned to HMRC’s outdated ‘policy view’ of IR35 status. So, with the CEST engine remaining unreliable, what do the 40,000 private sector firms, who may still use it, need to watch out for?
Let’s start from the beginning. What is CEST?
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