top of page

Contractor pursued by HMRC despite outside IR35 determination

In March 2017, HMRC released an online tool named Check Employment Status for Tax (CEST) to provide guidance for firms looking to make status assessments.

Since the tool has been in place, there has been ongoing concern with the reliability of it as multiple tests of CEST have found the tool to be inaccurate.

As a result of the tool’s inaccuracy, multiple government bodies including the Department of Work and Pensions (DWP) have been fined or required to pay large tax bills after failing to correctly assess the employment status of their contractors.

HMRC opened an investigation in November 2019 regarding the employment status of the contractor despite the CEST tool determining an outside IR35 determination. The contractor was facing up to £100,000 in tax liability if deemed by HMRC to be inside IR35.

In July 2021, the CEST tool determined the contractor as operating outside IR35, meaning they were self-employed and providing a service to the business rather than working under the terms of an employee. Despite this decision, HMRC pursued the case against the contractor until January, this year.

As businesses are now liable to determine the employment status of contractors, there are calls for the tool to be reformed – HR Magazine quoted Seb Maley (CEO of Tax consultancy, Qdos) to say “CEST isn’t fit for purpose, whichever way you look at it. That HMRC itself ignored an answer provided by its very own IR35 tool tells you everything you need to know. Businesses shouldn’t rely on CEST to determine the IR35 status of contractors. After all, HMRC won’t hesitate to disregard information put forward by the tool, which provides zero guarantees.” The contractor was represented by Qdos who successfully closed the case against him.

This case against a contractor, highlights the unreliability of the tool and shows that decisions made by this tool do not protect contractors or businesses being investigated by HMRC, despite the tool being created by them.

Stonebridge Contracting do not utilise CEST for determinations, instead we use a trusted secure tool; which has more in-depth questions to achieve an accurate result. For more information about what this could mean for your business, please contact where we will be happy to assist.

389 views0 comments


bottom of page