According to a statement from independent portal for the UK contractor community ContractorCalculator, who made a series of Freedom of Information (FOI) requests as part of a five-month investigation, more than 100,000 people could be facing incorrect tax bills. This is because ContractorCalculator claims HMRC has admitted no detailed proof to demonstrate that its CEST tool is accurate.

ContractorCalculator claims it was told by HMRC: “The CEST tool testing was done by a workshop… The only documented output of the workshops is the set of rules used by the tool.

“Our records show that HMRC has used the CEST tool to test all the cases cited in your request, but we do not have a record of how each question was answered as part of the testing, only the end determination.”

ContractorCalculator founder and CEO Dave Chaplin, who says he is poised to call for an immediate inquiry by the Public Accounts Committee into HMRC’s conduct following this discovery, said he was “incredulous that a fundamental piece of the CEST jigsaw is missing”.

“For a tool of such importance, the lack of rigour involved in its testing methodology is astonishing. You have to wonder if HMRC has shredded any evidence to cover up CEST’s shortcomings?

“HMRC publicly claimed that the CEST tool gives the right result provided the correct answers are entered into the tool but have chosen not to document any of those answers used during their testing process.

“There is a very simple way they can resolve this challenge – just publish the results of the 23 court cases, as put through CEST and prove their claims.”

Chaplin said HMRC had taken a slapdash approach to building a tool that was clearly not fit for purpose, not been tested properly and missing important case law. “People’s lives and livelihoods are in tatters, not just at the BBC, as has been widely reported, but in other public services too. By forcing false employment upon people, HMRC could now face tens of thousands of claims for tax refunds and we won’t know what the scale of this is likely to be until January 2019 next year. Could this be HMRC’s PPI scandal?”

“It’s even more appalling that HMRC wants to roll-out to the private sector the very same IR35 rules that have caused this chaos in the public sector. HMRC has significantly fallen down on its duty of care to businesses and tax payers.”

For her part Julia Kermode, CEO of trade association The Freelancer & Contractor Services Association (FCSA), said CEST is “flawed, is not fit for purpose and has caused a lot of confusion and chaos in the public sector already”.

“People are being wrongly pushed into false employment and the tool is failing them. Rhetoric from government suggests that the public sector changes have seen a rise in compliance but more numbers on the payroll is not indicative of compliance just simply more people on the payroll with many being incorrectly placed there. 

“What ContractorCalculator has learned in its FOI request is alarming and, I would hope, one more reason to prompt HMRC to question any move to roll-out the reforms and the tool to the private sector.”

Seb Maley, CEO at business solutions provider Qdos Contractor, echoed Kermode’s concerns. “HMRC has repeatedly claimed that CEST is effective, despite many experts raising concerns that it is quite simply not fit for purpose. Following these reports, how are public sector bodies meant to stand by, and contractors expected to accept the some 400,000 answers it has given since April 2017?

“Just last week, HMRC lost an IR35 case, which suggests they have trouble understanding the complexities of the legislation themselves.

“These reports strengthen the need for a thorough investigation into the accuracy of CEST. Additionally, our sector will expect answers as to why the tool looks to have been built in such a manner. If the shoe was on the other foot, one would expect HMRC to leave no stone unturned.”

HMRC was approached for comment on ContractorCalculator’s claims but Recruiter had not heard back by deadline.

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