Tax & admin Carly Hacon · 25 April 2018
HMRC’s employment status tool wrongly taxed thousands of contractors
An investigation into HMRC’s Check Employment Status for Tax (CEST) tool has revealed that thousands of contractors have been wrongly taxed. The CEST tool is a fundamental part of the process where HMRC determines whether IR35 applies to an employment arrangement. IR35 confronts tax evasion through disguised employment. It outlines how freelancers and contractors are taxed when working for a public sector client. CEST is not appropriate for private sector use. Online guidance accompanying CEST‘states if there is information they think are wrong or if arrangements are manufactured, then the taxman can challenge the results. Chaplin added: HMRC essentially granted itself the freedom to challenge any assessment that it sees fit. Though hirers and agencies are effectively coerced into using the tool by HMRC, they know that an outside IR35 evaluation from CEST still poses significant tax risk. the disparity between the number of contractors who are told IR35 does not apply by CEST and those who are taxed as being outside of IR35 is no coincidence. the irony now is that they are lining themselves up for legal challenges from contractors who have been wrongly assessed. This will cost the hirers more as they work to defend themselves and face repaying the taxes due.
ABOUT THE EXPERTCarly Hacon
Carly Hacon is a reporter for Business Advice. She has a BA in journalism from Kingston University, and has previously worked as a features editor for a local newspaper.