Use of HMRC’s CEST tool by Met Office and CCS criticised by contracting body

ContractorCalculator has raised further concerns over the accuracy of HM Revenue & Customs’ Check Employment Status for Tax (CEST) tool.

A statement, released by the contracting authority this week, reveals that in responding to a Freedom of Information (FOI) request from contracting authority ContractorCalculator, the Met Office disclosed it deemed 98% of contractors caught by IR35 following assessments carried out between April 2017 and January 2019, while during the same period the Crown Commercial Service (CCS) determined 87% of its contractors to be within scope of the rules.

Of 141 assessments conducted by the Met Office between April 2017 and January 2019, three contractors were considered outside of IR35, compared with 138 who were found to be ‘deemed employees’, while the CCS passed 13 contractors, failing 84.

Over the past couple of weeks ContractorCalculator revealed 98% of IR35 status assessments carried out by High Speed 2 (HS2) in 2018 deemed the contractor to be caught by off-payroll rules, while 99% of contractors working for Network Rail were deemed by the public body to be caught by off-payroll rules in 2018.

But in commenting on these latest revelations, Dave Chaplin, CEO and founder of ContractorCalculator, said: “It’s no coincidence that yet more public sector bodies, failing an absurdly high proportion of contractors, have acknowledged using CEST. HMRC has clearly fettered its discretion by releasing a tool that gives incorrect guidance, resulting in thousands of workers being wrongly classified and incorrectly taxed.

“HMRC appears to have taken it upon itself to override the law, having inflicted the biased CEST on the public sector, resulting in widespread non-compliance whereby genuinely self-employed workers are being told they are ‘deemed employees’.

“With CEST almost unanimously bundling contractors into ‘deemed employment’, public sector bodies will also be paying the new off-payroll tax of 14.3% when they perhaps didn’t need to.

“CEST has been used to extort money from businesses and workers. It’s no wonder there are reports of the self-employed refusing to work in the public sector despite contract rates rising considerably.

“Laughably, HMRC claims that its work is about restoring fairness in the tax system. Since when is deliberately cheating and overriding the law considered fair?”

In response to ContractorCalculator’s findings, an HMRC spokesperson said: “HMRC does not comment on identifiable customers. Employment status for tax is determined by the contractual terms and conditions, and the actual working practices of an engagement. The reform of the off-payroll working rules does not affect the genuinely self-employed, only those incorrectly paying tax as though they’re self-employed, when they are in fact acting as employees.

“CEST was rigorously tested against known case law and settled cases. It is accurate and HMRC stands by the result if the tool is used correctly. CEST is not biased towards an employment outcome, and in the last 12 months over 50% of determinations it has provided have been for self-employment or outside the off-payroll rules.

“HMRC estimates only around a third of individuals working through their own company fall within the rules and should be taxed as employees. However, numbers will vary between roles and sectors.”

Meanwhile, a CCS spokesperson said: “CCS follows HMRC guidance on IR35 classification and we are confident appropriate assessments have been made in line with this guidance.”

Also commenting, a Met Office spokesperson said: “We follow HMRC guidance on matters relating to IR35. This includes using the CEST tool to make decisions on the IR35 status of each role filled by a contractor.”

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