HMRC published their new online employment status tool, CEST 'Check Employment Status for Tax' in March 2017. This can be used by workers, agencies and engagers in order to determine whether a worker is employed or self-employed for tax purposes.

The new tool was introduced to co-incide with changes to the treatment of Personal Service Companies (PSCs) operating in the public sector from 1 April 2017.   It can however be used for all types of workers in both the private and public sectors.

The tool will give you HMRC’s view on whether a worker is employed or self employed.

If the result is 'employed' for a worker:

  • Their engager must apply PAYE on the fees paid to the worker
  • For public bodies who are engaging workers via personal service companies, the responsibilty for PAYE moves to the public sector engager for periods of engagement after 5 April 2017, see Off-payroll working & Public Sector.
  • PSCs who are not operating in the public sector should apply IR35 to an engagement.

HMRC will stand by the result given provided you give accurate information and do not enter into contrived arrangements to get the answer you want. If they are not happy with either the responses given or the level of understanding of the person using the tool they are likely to challenge all engagements you have assessed under the tool.

The service is anonymous and does not store information, so you should print a copy for your records where you want to rely on it.

Comment

It is noted that the CEST does not consider the test for Mutuality of Obligation. This can be an important test, depending on the facts and circumstances of the case. If a worker is not obliged to take work and an employer is not obliged to offer any there can be no mutuality of obligation. It is also something that may be created over a period of time.

Links

Our subscriber guides:

Employment status

IR35

Personal service companies & tax

Mutuality of Obligation

External links

HMRC’s CEST is found here.


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