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Government fails to address industry concerns over CEST employment status tool, IPSE says

The Government is continuing to ignore industry concerns that its online IR35 status tool is flawed, IPSE (the Association of Independent Professionals and the Self-Employed) said today.

Earlier this year, HMRC circulated to the IR35 Forum a draft position paper setting out its position on one of the key tests of an employment relationship, mutuality of obligation. Concerns had previously been raised in the Forum, and by experts, that the online CEST tool was flawed because it did not test for mutuality of obligation.

Earlier this week, HMRC publicly released their updated position, which has not addressed the concerns raised, or recent tribunal decisions.

“It is extremely disappointing that HMRC’s paper remains unchanged from an earlier draft first shown to the IR35 Forum in March,” IPSE’s Director of Policy and Public Affairs Simon McVicker said.

“They have completely failed to engage with arguments put forward by IPSE and other experts that their position on mutuality of obligation – that it is always present in any contract – is fundamentally flawed.

“This isn’t just IPSE’s view, it is also the court’s view,

as was set out in our letter to HMRC

 

“Since then, two more tribunal cases have come to light which directly undermine HMRC’s position. These two cases make it clear that something more than simply pay for work performed is required to establish the necessary mutuality of obligation for an employment relationship.

“This is a crucial point because the CEST tool, which HMRC encourage clients and individuals to use to determine IR35 status, doesn’t consider mutuality of obligation at all.

“It is totally unacceptable for the Government to ask people to use a tool which is so out of step with the latest tribunal decisions. The failure of the HMRC paper to even acknowledge those tribunals suggests they have their heads in the sand.

“There are potentially thousands of genuinely self-employed who have used the tool and been miscategorised as being inside IR35.

“This problem will become even more acute if the Government rolls out the IR35 changes to the private sector, where the sheer variety and complexity of engagements inevitably means that mutuality of obligation cannot be said to exist in every case.

“How can the government, in good conscience, even consider extending the ill-judged IR35 changes to the private sector without fixing fundamental problems with the CEST tool?”