Tax check tool CEST is the pits, say UK contractor consultancies as latest HMRC usage stats are published The UK tax collector’s controversial Check Employment Status Tool used by contractors to determine their IR35 status returned inconclusive responses for one in five of the million plus times it was called upon in 16 months. As confirmed by the latest statistics from Her Majesty’s Revenue and Customs department today, CEST was …
The CEST tool makes no sense as the whether someone is employed or self-employed comes from the contract and how it is worded (the actual working practice only counts if contract is declared as out of scope)
The client asks their legal team to draft a contract to be in scope (no substitution etc.) and that's it. If the CEST tool somehow shows the contract is out of scope still, then the client's legal team screwed up and they will just amend it.
There is no penalty if actual working practice is out of scope and the contract is worded like it is in scope, so companies are covered.
Let's say you want to appeal it. Then the client can just say good bye.
That's why they don't develop it properly, because there is no point.
And nobody will complain because we are S(H)it scared of a TAX investigation, hence the anonymous post.
In addition lots of these company's that carried out a blanket review are non compliant with GDPR / DPA 2018. I used the CEST Tool and I was outside with my contract.
Been there I contested a mid contract review as it was not aligned with my contract, the client did not have copy or visabilty of my contract.
I also informed them that as the information is incorrect they do not comply with GDPR and I would like to correct the information on the pre-populated questions in the review. (blanked out with no option to change).
So what am I to do 3 months are outside and the other 9 months would have been inside. I walked.
So if they have reviewed contract and deemed me to be inside the Agency or Client should have paid the tax on my payments. So do I work out what I recieved and pay it straight into my personal bank account listing payment as inside IR35 / Tax paid?
They will probably Offshore the work looked what happened with a US Plane company.
My question to the floor is this another form of Modern day slavery that take jobs away from UK, that dfon't pay the tax owed lining the pocket of the multinationals again.
RANT OVER
Did that with BAE Systems back last Dec. The response?
"You have bought no new information to justify a re-assessment using CEST."
I got the feeling they were crapping themselves as they knew they'd been caught out. The management were happy for us troublemakers to go. The project teams less so as they knew the hidden cost of getting new team-members and bringing them up to speed.
I just took the test for role I'm going to be doing and it gave me a nice certificate for my employer not paying national insurance and income tax. The reasons were,
Substitute which to be fair I would choose anyway because I would want them to be competent enough to do the work I'm getting paid for.
Client does not have control over this work. Why would they? It's building a data warehouse/reporting/collection system and integrating with the data provided. That's what I'm being asked to do.
The only things they have control over is when it needs to be completed, what they want out of it and then any adjustments required in the future.
So based on that is CEST right? I'm setting up a limited company to pay myself a nominal wage for N.I. then taking the rest as dividends after the tax is paid on that.
I'm a contractor.
The CEST tool assumes MOO, which is *not* the case, and I do not take contracts where the client has used it and by this has placed the contract inside IR35. It is morally repugnant.
Fortunately, I still have access to the EU job market, unlike most of the poor buggers in the UK, who can't escape what's being done.
If you pass laws and rule, as HMRC does, but you pass (tax in this case) laws which are unjust and widely ridiculed, you bring yourself into disrepute. HMRC I suppose, if it has thought about this matter, assumes it has such power as to be able to force itself on everyone, regardless of how unjustly HMRC behaves; and given the advent of massive State surveillance (which has existed in banking for a few decades now), this is I would imagine true.
I understand a common refrain from those in favour of mass surveillance (typically bits of the State and no one else) is that "if you have nothing to hide, you have nothing to fear". This assumes the entity conducting surveillance behaves in a responsible manner, both now and forever in the future.
Contractors who are company directors pay a minimum of 25.8% NICs. They pay Employee's Class 1 NI at the rate of 12% (Earnings above the primary threshold up to and including upper earnings limit) and 2% for Balance of earnings above upper earnings limit, and 13.8% rate the Employer's NI.
But, self-employed who are not incorporated who represent a bigger share of the total number of self-employed, pay 'special' NI rates
- Class 2 if profits are £6,515 or more a year or
- Class 4 if profits are £9,569 or more a year,
and no Employer's National Insurance.
Class 2 attracts payments of £3.05 a week, and Class 4 means that you'll pay 9% on profits between £9,569 and £50,270 and 2% on profits over £50,270.
The data from UK Companies House shows that the vast majority of SMEs pay their directors low salaries - usually lower than the Personal Allowance - and at times millions in dividends, yet they are not targeted by IR35, which defeats its stated purpose to ensure that everyone is paying national insurance contributions.
During this pandemic, HMRC provided no financial support to contractors who are company directors, claiming that the HMRC does not know how much they have paid in taxes, which of course it is a big fat lie, as the SAs provide detailed data on dividends and even on the interest one might earn from savings accounts.
HMRC is not interested in ensuring that workers are not pushed in self-employment by rogue employers. It is always unwilling to catch up with dodgy schemes the likes MOUs, and the UK Companies House enables any crook to record a company with no robust system to check the identity of the directors or the legitimacy of the company.
While The Register is referring mainly to IT contractors, there are many sectors of economic activity where contractors are impacted by the IR 35, from university lecturers to local nurses, GPs and specialist doctors.
IR35 seems to be designed to suppress wages and cater for outsourcing companies, including those that sponsor graduates who are dispatched to third parties, often in the public sector.
In a nutshell: "HMRC is getting a bigger slice of the pie, but has made the pie smaller."
IR35 is actually quite an old rule. It's just that HMRC have changed who is liable to pay the tax owed on people found to be operating inside the IR35 rules recently.
It was, since the inception of IR35 till recently, that the employee/contractor was liable for the taxes, and the employer/client was not. Given that when the rules were introduced they were ostensibly to root out "hidden employment" where a person was doing the work of an employee without paying the right taxes, or getting the right benefits, this was the wrong way round (in my head anyway) but companies with large contractor bases objected to being held liable for the dodgy tax practices of their contractors, and as the rules are entirely about tax (and NI I know, but that is essentially a form of tax) and not about employment rules in general it made sense to HMRC to apply it that way.
HMRC have recently changed the rules to make the employer/client jointly liable for the taxes owed, largely because they weren't collecting enough taxes, unscrupulous contractors built up all sorts of dodges for the IR35 rules, some legal, some less so, but chasing all the contractors individually wasn't scalable.
Part of the issue is that if you are found to be within IR35 HMRC expects tax to be paid as if you are an employee, a lot of tax deductible expenses (that may be genuine expenses) are not allowable under IR35 but, crucially, IR35 *ONLY* covers tax rules, and says nothing else about the workers employment status.
IR35 has, for decades, failed to deal with the problem of hidden employment, because it is built only to deal with the harms of hidden employment to the exchequer. It is now targeting the pockets of companies that may be inclined to take advantage of hidden employment, but in doing so it is harming people who may already be being harmed by being forced into hidden employment, and also people who are genuinely trying to work more flexibly. It is a blunt instrument by design, and it has been misapplied for so long that just turning the screws tighter, as HMRC are trying to do, is doing more harm than good.
For context, I am a full time employee, in part because early on in my career IR35 was simply too onerous to contemplate risking being a contractor, quite apart from the financial risks that are inherent to insecure work from contracting.
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