HMRC’s software tool that is supposed to help determine IR35 status is failing to produce a definitive answer in almost one-in-five cases.
Reforms to the off payroll working regulations will be introduced to the private sector in April next year, but HMRC’s online tool for determining IR35 status, an enhanced version of the check employment status for tax (CEST) tool is still failing to provide adequate support to help employers and contractors determine employment status.
Published statistics for the operation of the enhanced tool over the period 25 November 2019 to 24 November 2020 show that of 975,416 CEST uses, in 188,719 of cases the outcome was ‘undetermined’, meaning that in 19% of cases employment status was not clear.
HMRC said it had worked with more than 300 stakeholders to make the tool clearer, reduce user error and consider more detailed information.
When CEST cannot provide an answer, users are told to check the information they have inputted, referred to the employment status manual and given a HMRC phone number and email address they can contact.
HMRC said: “CEST produces a determination in the vast majority of cases and HMRC stand behind every result it gives, provided the information is accurate and it is used in accordance with our guidance.
“To reach a conclusive result in a greater proportion of cases we would need to add in more complex questions, which would add difficulty for the majority of users.
“In more finely balanced cases, CEST is expected to provide an undetermined outcome and HMRC has provided detailed guidance and dedicated support to help customers make status decisions.”