[UK] HMRC testing ‘CEST 2.0’ but tight-lipped about launch date

HMRC will not reveal when a new version of CEST is going to be unveiled, even though it is widely believed that an update to this technology is pending, ContractorUK reports.

By specifying when contractors and other businesses - such as engagers who are typically responsible for IR35 status - can expect changes to the tool, HMRC  would allow them to plan.

ContractorUK asked HM Revenue & Customs about when the as yet unnamed ‘CEST 2.0’ might potentially be ready for taxpayers to use.

New platform for CEST

An HMRC spokesperson would only tell the publication, “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 reportedly reveals more, stating that HMRC’s Data Analysis Team has undertaken a “customer journey review” of the tool.

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

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

However, in common with the HMRC, the document from the Treasury offers no timeline or date for when businesses will have access to the new technology.

IR35 expert Kate Cottrell - from Bauer & Cottrell, formerly of the Revenue - shared her disappointment with ContractorUK. She said, “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.”

'Expect another CEST rollout'

An IR35 project manager told ContractorUK that sooner rather than later is the key since businesses are losing money thanks to the rules which CEST tests for, at an already financially-challenging time.

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

“[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 reportedly states that HMRC is “moving away from publishing sector-specific guidance,” suggesting that the new CEST won’t refer to or factor in industry practices.

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

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

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

The board then reportedly attributes blame to ministers who were “reluctant to listen” to CEST’s critics, despite several government departments since paying HMRC “large penalties” for misusing it.

In its report, ABAB says the government’s decision in September to repeal the off-payroll rules, followed by its October U-turn, has been “distressing” to those who had long claimed there were issues with the rules.

The board adds that its members - 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.

Ms Cottrell said of the subtext, “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 is unchanged

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

When asked by ContractorUK if tax officials will stand by IR35 status determinations produced by the existing ‘old’ CEST, once the new version of CEST has gone live, the HMRC spokesperson said, “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.”

Source: ContractorUK

(Links and quotes via original reporting)

HMRC will not reveal when a new version of CEST is going to be unveiled, even though it is widely believed that an update to this technology is pending, ContractorUK reports.

By specifying when contractors and other businesses - such as engagers who are typically responsible for IR35 status - can expect changes to the tool, HMRC  would allow them to plan.

ContractorUK asked HM Revenue & Customs about when the as yet unnamed ‘CEST 2.0’ might potentially be ready for taxpayers to use.

New platform for CEST

An HMRC spokesperson would only tell the publication, “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 reportedly reveals more, stating that HMRC’s Data Analysis Team has undertaken a “customer journey review” of the tool.

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

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

However, in common with the HMRC, the document from the Treasury offers no timeline or date for when businesses will have access to the new technology.

IR35 expert Kate Cottrell - from Bauer & Cottrell, formerly of the Revenue - shared her disappointment with ContractorUK. She said, “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.”

'Expect another CEST rollout'

An IR35 project manager told ContractorUK that sooner rather than later is the key since businesses are losing money thanks to the rules which CEST tests for, at an already financially-challenging time.

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

“[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 reportedly states that HMRC is “moving away from publishing sector-specific guidance,” suggesting that the new CEST won’t refer to or factor in industry practices.

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

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

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

The board then reportedly attributes blame to ministers who were “reluctant to listen” to CEST’s critics, despite several government departments since paying HMRC “large penalties” for misusing it.

In its report, ABAB says the government’s decision in September to repeal the off-payroll rules, followed by its October U-turn, has been “distressing” to those who had long claimed there were issues with the rules.

The board adds that its members - 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.

Ms Cottrell said of the subtext, “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 is unchanged

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

When asked by ContractorUK if tax officials will stand by IR35 status determinations produced by the existing ‘old’ CEST, once the new version of CEST has gone live, the HMRC spokesperson said, “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.”

Source: ContractorUK

(Links and quotes via original reporting)