CEST: Unable to determine result 'requires human intervention'

Contractors saddled with an indetermined CEST result should insist to their end-user that they seek expert advice from a human, not another tool.

Status experts yesterday issued this recommendation in light of new HMRC data showing  the indetermined rate of HMRC’s Check Employment Status for Tax to have notched up again, this time to 22 per cent.

“The number of outcomes where the decision is undetermined continues to rise,” said Chris Mattingly, CEO of IR35 Navigator, reflecting on the November 2019-August 2021 dataset.

'The only real way to achieve certainty'

He added: “This demonstrates that automated tools such as CEST cannot be relied upon to decide a worker’s employment status for tax.

“The only real way to achieve certainty, is to have an expert assessment, where the full facts of the engagement can be properly considered.”

Unlike Mr Mattingly, tax lawyer Rebecca Seeley Harris does not offer contractors individual IR35 status assessments.

Yet she too agrees that an automated program just doesn’t cut it.

'Horribly costly'

“Employment status is far too complicated….[for] CEST or any other tool,” the founder of ReLegal Consulting said. “Engage a professional adviser to take ‘reasonable care’.”

Online, an adviser to optical, audiology and accountancy firms echoed: “Very much agree…that advice at that point [receiving an indetermined result], would be vital.

“[It can be] horribly costly if it goes wrong,” said the adviser, Gil Vasey. “Undetermined is a bizarre result.”

But it’s also a totally legitimate result.

'Add your own evidence'

“Having listened to HMRC webinars on CEST, it’s interesting that they think that 'undetermined' is a legitimate outcome for status by itself, and I have to agree,” says Ms Seeley Harris, who has written a book on how to use CEST.

“In order for the outcome to be accurate, as HMRC require if they are to stand by the results, you can have an ‘unable to determine’ outcome and then add your additional evidence.”

Advising end-users in a LinkedIn post, the author of CEST Explained continued: “In this case, you can add your own evidence to provide proof of why you have paid the contractor either on or off-payroll. So, unable to determine doesn't necessarily have to be a negative thing but, it still has to be accurate.”

'Simply where choices have to be made'

Writing about the HMRC data, one of its former inspectors tells ContractorUK today that getting neither an inside nor an outside IR35 outcome from CEST is, paradoxically, a time for decisions to be made.

“Around a quarter of CEST usage in the last month of data came back as undetermined. And in practical terms, this is simply where choices have to be made,” says the ex-tax official, Carolyn Walsh.

Now boss at CWC Solutions, Ms Walsh added: “The end-user may, for example, treat the contract as one of employment. Or it may change direction and therefore the basis on which the contract is offered, and accepted. It can also mean there is a need for more information, so reaching out to a third-party expert for an unbiased review is understandable.”

'Complete waste of time'

It’s more than merely ‘understandable’ according to status specialist Kate Cottrell -- it’s very likely the only way to achieve resolution, assuming no algorithms will be involved.

“In over 20 years of IR35 contract reviews and actually working IR35 and tax/NIC status cases, we have NEVER had an undermined result,” began the Bauer & Cottrell co-founder.  

In a statement, Ms Cottrell added: “These new CEST statistics from HMRC are entirely meaningless with no account being taken of how many times the tool has been revisited by the same party and sadly, no account of how many of the ‘undetermined’ recipients went on to read any of HMRC’s guidance. 

“The fact remains that all of the IR35 tools out there that do not include human intervention are a complete waste of time, and no one should rely upon the results.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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