IR35 - We passed the CEST tool test too easily ???

[markomagic1]

Hi

I took the CEST tool test today and passed it. Whilst that sounds good, I'm a bit puzzled by how quickly it passed me, how few of the questions it asked, let me explain.

My wife and I are joint shareholders (50/50) in our Ltd company. We actually met at work, we have the same profession, very similar levels of experience and expertise. Essentially we both do the same work, contracting for Clients.

When taking the CEST tool test this morning, as you'll be aware, one of the very first questions it asks you is about right of substitution. In our case, whilst we've never had to exercise it for a client, the reality is that either one of us could do the other persons job quite competently, the Client wouldn't suffer. Obviously in the event that this was necessary (due to illness etc) then the 'worker' that replaced me (my wife) would be paid for by our company of course. Box ticked.

Here's the odd thing. On inputting this information into the tool it immediately came up with the resulting confirmation we are 'Outside the intermediaries legislation' and therfore IR35. This puzzled me as it didn't at any stage even bother asking all the other questions, e.g.

Are we paid an hourly/daily rate basis or fixed rate or piece of work?
Does the client have any control over the worker?
Is the worker required to work onsite? using their own materials etc?

The Tool makes a point that the confirmaton is an approval that HMRC have passed us and can be used as such.

Am I missing something, or is a genuine right of substitution therefore the absolute key overriding ingredient to being outside IR35?

Nothing else matters if you can demonstrate that?

Cheers
M

[jamesbrown]

If you can convincingly demonstrate either a valid (not unreasonably fettered) right of substitution or an adequate lack of D&C, then the contract is outside. Either one is sufficient, in general. The same also applies for a lack of sufficient mutuality of obligation, but the CEST tool does not consider this.

Based on your description, I think you’d be in a solid position, in principle, but you’d still need to demonstrate, in reality, a valid right of substitution for each contract. In other words, you cannot just assert this as a right. As I say, if you can demonstrate that right, the absence of a requirement for personal service is a sufficient condition, in theory. Ultimately, the CEST tool itself is flawed, but if you can get your client to agree the outcome (e.g. sign it), I see no harm in retaining it to demonstrate your position, based on what they’ve said about respecting it when answered truthfully.

[MrButton]

IR35 - We passed the CEST tool test too easily ???

You could sub your wife in for a couple of days while you go on hols... that would demonstrate that it’s not a sham ROS? And pretty much secure your status (within this contract) as outside.

[northernladuk]

Are you running against an actual gig or just playing with the answers? When the client runs it against his perception of the gig it might be a completely different case. We can all pass putting in stuff we think will work.

[radish2008]

Are you running against an actual gig or just playing with the answers? When the client runs it against his perception of the gig it might be a completely different case. We can all pass putting in stuff we think will work.

This isn't necessarily true - I did the tool 3 times, once with a bit of swing to me, once with actual work practices and once choosing answers that might be given if the interpretation was to swing away from me. I passed all three times, on the last one I passed due to paying expenses that were deemed significant and a risk if unpaid. I was surprised but still think it's all bollocks.