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HMRC’s faith in IR35 tool has potential to endanger UK contracting

IR35 specialist, Qdos Contractor, has criticised HMRC’s defence of CEST, its IR35 tool, following today’s Public Accounts Committee (PAC) meeting.

In a HMRC performance progress review, PAC Chairwoman, Meg Hillier, asked HMRC’s Jim Harra, if CEST was, as it has often been described, ‘not-fit-for purpose’.

In response, Mr Harra’s backed the tool, which has been used 750,000 times since its release in April 2017, stating that HMRC will in the majority of cases stand by the results it provides.

Qdos Contractor CEO, Seb Maley, commented:

“That HMRC has staunchly backed CEST once again comes as no real surprise, unfortunately. Since its arrival, HMRC has been adamant about the tool’s reliability, which many IR35 specialists have quite rightly criticised.

“HMRC reiterated they will stand by results provided by CEST, which again is of real concern. Firstly, the tool’s one-size-fits-all approach has undoubtedly thrown up inaccurate IR35 answers, while the reality of HMRC standing by every result is unrealistic.

“HMRC would go to great lengths to check the answers given were correct - essentially going through the process of an IR35 enquiry - before they actually stood by anything. So in that sense, CEST doesn’t really differ to an assessment made by anyone else.

“Ultimately, HMRC’s faith in CEST has the potential to endanger UK contracting, particularly should the Government press on with reported plans to extend IR35 reform to the private sector.

“From this meeting, it’s clear that HMRC’s attitude needs to change and that CEST’s failures are addressed immediately.”

Qdos Contractor research into over 1500 contractors recently revealed:

81% of contractors would be deterred from working with a client or through an agency if CEST was the sole method of setting IR35 status