The HMRC has upgraded the CEST tool for IR35 with a direct update. The manual of HMRC reveals a series of prospective questions for CEST, which are expected to evaluate tax status.
The updated internal manual by the HMRC contains around 70 roughly questions regarding employment status. The guide, updated on 17th January, included questions on contact details, worker engagement, mutuality, and payment arrangements. You can find a new list of questions in the online internal manual of the HMRC.
Although the manual updates are not directly added to the CEST tool, they remain a part of HMRC’s framework that is used to assess the tax-related employment status of a worker.
According to Amit Kapoor, the Managing Director at Mindful Contract Solutions, the newer CEST upgrade is “more grounded in reality.” Additionally, the answer options and the improved clarity of the guidance have made the tool a lot more useful. It has decreased uncertainty for those hirers who are filling a questionnaire.
Moreover, Kapoor explained that the tool’s inquiry into a holistic set of questions, prior to the announcement of a decision, align wells with the court approaches in the IR35 cases.
The CEST tool was developed in March 2017, following which it received severe criticism from all over the country. The HMRC updated it in November 2019 before the launch of IR35 in the private sector in April 2020.
Meanwhile, Susan Bal from RSM Employer Solutions Partner said that CEST is the only tool that can generate an outcome for employment status that is approved by the HMRC. She praised the tool and stated that the most recent updates to the internal manual by HMRC can end up as extremely useful. This can tackle the types of questions that are used for the status assessment and help contractors utilise CEST.
In the past few months, the HMRC issued new guidance on different aspects of IR35. Still, a study has revealed that 40% of businesses plan to phase out contractors after the IR35 legislation comes into effect.
Although the government agreed to launch a review of IR35 before the April launch, there are still some consultancy and recruitment firms that are demanding to delay it further. The REC (Recruitment & Employment Confederation) has called for a delay until 2021.