CEST Tool - how to check IR35 Compliancy
- mercedesmcgarry
- Jan 11, 2022
- 1 min read
IR35
IR35 refers to the UK's anti-avoidance tax legislation designed to tax 'disguised' employment at a rate similar to employment. "Disguised employees" refers to workers who receive payments from a client via an intermediary, for example, their own limited company, and whose relationship with their client is such that had they been paid directly they would be employees of the client.
Within this legislation, tax rules were introduced to make end clients responsible for assessing whether someone fell under IR35 rules. And whilst this was previously limited to the public sector, from April 2021 this now extends to private sector companies of large to medium size. Small businesses of all types are exempt.
Use Companies House guidance to assess your business size.
CEST Tool
This literally means 'Check Employment Status for Tax' and is the HMRC offered service for testing an engagement or role to check its IR35 status.
To use it, you will need to have agreed on certain elements of the role such as the ability to work on other projects (exclusivity), or whether you are an 'Office Holder'.
Things to consider:
CEST only provides a decision in 80% of IR35 cases.
CEST requires a manual record-keeping process.
There is room for interpretation so be clear on the agreed remit.
HMRC will not stand by results achieved through contrived arrangements, designed to get a particular outcome from the service. This would be treated as evidence of deliberate non-compliance, which can attract higher associated penalties.
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