CEST improvements revealed in OTS report
The first details of what the taxman’s promised updates to CEST will look like have been disclosed by the Office of Tax Simplification.
In a new report on small business taxation, the OTS reveals that “plainer English” will be inserted into the questions which the tool poses, “to reflect wider target audiences.”
There will also be a push by HMRC to use “more embedded data” in the “number of updates to CEST,” due to be made before the off-payroll working rules hit the private sector in 2020.
This will result in users of Check Employment Status for Tax seeing “info boxes and pop-ups” at stages of using the tool which “need further explanation” than is currently provided.
The beefed up use of embedded data reflects the OTS’s earlier recommendation that HMRC should also provide “more in-depth” guidance for the parties who use the tool.
Such guidance is aimed and taxpayers and therefore appears to be separate to the technical guidance that the IR35 Forum has asked the Revenue to improve.
Meanwhile, in the 15 per cent of instances where CEST is unable to return a definitive answer in terms of IR35 status, the OTS says HMRC should offer “signposting” to guidance.
In Chapter 3 of ‘Simplifying Everyday Tax for Smaller Businesses,’ the office adds that such signposting should also direct CEST users to HMRC’s Employment Status helpline.
These referrals should be made where the taxpayer does not agree with CEST’s conclusion, OTS says. And not agreeing with the engager’s decision offers even fewer options.
“There is no easy route for a service provider to appeal against a ruling by the engager that the services are provided under a quasi-employment,” the office acknowledges.
'Dealing only with the symptom'
This same cautioning, but critical tone crops up later in the report: “This [the off-payroll framework] and other anti-avoidance legislation is dealing with the symptom rather than the underlying issue, which is the differential tax/NICs treatment and other regulatory burdens that make an employee significantly more costly to a business than a contractor.”
In response to its own diagnosis, OTS recommends that officialdom give prospective users of company formation websites “a nudge to stop and think before they push the button to set up the company”.