What should employers or contractors do if the HMRC IR35 tool delivers an undetermined outcome?

Dec 22, 2020

The reforms to the off payroll working regulations are set to be introduced to the private sector in April 2021, and HMRC’s online tool for determining IR35 status delivers an outcome in most cases. But what should employers or contractors do if the outcome delivered by this online tool is ‘undetermined’?

If you are an employer or a contractor you can use the HMRC’s online tool, Check for Employment Status for Tax (CEST) service to help determine if you should be classed as employed or self-employed for tax purposes. In most cases you will get an answer because this online tool has produced a definitive response in over 80% of cases since it was introduced in November 2019.

HMRC have stated that CEST produces a determination in the vast majority of cases. They will stand by every result, provided the information provided is accurate, and the online tool is used in accordance with their guidance. However, in some cases a conclusive result can only be reached if more complex questions are added. This would unsurprisingly add difficulty for the majority of users, so HMRC have been reluctant to add these requests.

To complete the CEST service you will need to know the following information:

  • the details of the contract.
  • the worker’s responsibilities.
  • who is responsible for deciding what work needs to be done?
  • who is responsible for deciding when, where and how the work is done?
  • how the worker will be paid.
  • if the engagement includes any corporate benefits or reimbursement for expenses.

When CEST can’t provide a definitive answer, users of the online service are instructed to check the information they have input. Following that, they are referred to the Employment Status Manual’ and given a phone number and email address for them to contact HMRC.

In some cases, the answers to the questions are more complex, leading to a finer balance and making it more likely that CEST will provide an undetermined outcome.

If you are an employer or contractor in this situation you may need to seek advice from your accountant or one of our experts.