HMRC tests ‘CEST 2.0,’ ahead of secret launch date

The taxman won’t say when a new version of CEST is going to be unveiled, even though an update to his technology is clearly waiting in the wings.

HMRC specifying when contractors, and other businesses like engagers who are typically responsible for IR35 status, can expect differences to the tool would allow them to plan.

So ContractorUK asked HM Revenue & Customs about when ‘CEST 2.0’ -- or whatever the new and improved tool is going to be named, would be ready for taxpayers to potentially use.

'New platform for CEST'

But an HMRC spokesperson would only say: “We’re making improvements to our ‘Check Employment Status for Tax’ tool, transferring it onto a new platform to enhance the customer experience and to better integrate guidance.”

A Treasury document is a little more forthcoming, saying that a “customer journey review” of the tool has been undertaken by HMRC’s Data Analysis Team.

The team is identifying which CEST questions cause “the most difficulty,” and is exploring how more targeted support could be offered to users.

'What CEST users with undetermined status can do next'

The Treasury document further reveals possible help for ‘undetermined’ CEST users, saying “what [such HMRC] customers can do next” will be ‘additionally supported.’

But similar to HMRC, the document from the Treasury offers no timeline or date for when businesses will be encouraged to get to grips with the new technology.

Formerly of the Revenue, Bauer & Cottrell’s Kate Cottrell, an IR35 expert, is disappointed.

'Expect another CEST rollout'

She told ContractorUK: “The Administrative Burdens Advisory Board was the first to reveal this month that ‘HMRC are working hard to improve CEST.’

“But maybe HMRC should say a bit more about what they are actually doing and crucially, when stakeholders should expect another rollout.”

An IR35 project manager suggests sooner rather than later is the key, given businesses are losing money thanks to the rules which CEST tests for, during an already financially-challenging time.

'HMRC downplays costs for taxpayers'

“‘Over the coming months’ [is the only timetable specified in ABAB’s report],” began the project manager, Ryan Dawson of Kingsbridge.

“[But] ABAB also makes reference to businesses having incurred additional costs because of the off-payroll working rules -- costs which HMRC downplays at almost every opportunity.”

The Treasury document states that HMRC is “moving away from publishing sector specific guidance,” indicating that the new CEST won’t refer to or factor in industry practices.

'Not sufficiently robust'

PSCs will likely just be pleased HMRC is finally prepared to try something new with CEST, following numerous criticisms of the tool, and numerous occasions of HMRC standing by it.

In its 2022 annual report published on December 1st, ABAB describes CEST – based on feedback from businesses – as “not sufficiently robust.”

End-users have suffered “confusion and additional costs” because they have had to seek further advice -- advice “that [CEST] was designed to eliminate,” ABAB further criticises.

'How we can help HMRC'

The board then blames ministers, as they were “reluctant to listen” to CEST’s critics, despite several government departments since paying HMRC “large penalties” for using it wrongly.

“Maybe they [ought to] consider…[our] IR35 determination tool,” mused Paul Havenhand, CEO of Kingsbridge.

He continued his tongue-in-cheek recommendation to the Revenue: “[Ours is] proven, accurate and fast. We’d be open to discuss how we can help [HMRC].”

'IR35 off-payroll repeal U-turn was distressing'

In its report, ABAB says the government’s decision in September to repeal the off-payroll rules, only to change its mind in October, has been “distressing” to those who long-said there were issues with the rules.

And, the board adds, its members who come from a range of business backgrounds and professions representing the small business community have had to invest a “significant amount of time” in advising on the rules’ implementation.

The subtext isn’t lost on Cottrell. “You can now add the Administrative Burdens Advisory Board to the list of the many, many organisations to have looked forensically here and criticised both the rules and CEST.” 

She added: “The board calls themselves HMRC’s ‘critical friend.’ But will HMRC listen to their friends when they are being critical? Sadly, no.”

'HMRC view of case law hasn't changed'

“ABAB has confirmed what every rational and sensible person already knew --  CEST has shortcomings,” agrees Kingsbridge’s Mr Dawson. “[It is very difficult to not] be sceptical of how far that same HMRC will now go in fixing CEST. If at all.”

Asked if tax officials will stand by IR35 status determinations produced by the existing, ‘old’ CEST, once the new version of CEST is live (whenever that may be), the HMRC spokesperson told ContractorUK: “Our view on relevant case law has not changed. We stand by all CEST determinations, as long as information provided is accurate and used alongside our guidance.”

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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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