Andy Vessey, Kingsbridge’s Head of Tax, has been working with IR35 legislation for more than two decades, successfully defending hundreds of IR35 enquiries in that time. What he doesn’t know about IR35 isn’t worth knowing and so we’ve got him answering your questions on all things off-payroll in preparation for the IR35 reforms set to launch on 6th April 2021.
Today we’re looking at status determination tools, with Andy fielding questions on CEST and the Kingsbridge Status Tool.
Is HMRC’s CEST tool pointless and/or counter-productive when it comes to determining a clear outcome, due to the subjective nature of the input it requires?
In theory, if the information going into the tool is accurate, the outcome can be relied upon – HMRC have said this themselves. But the problem is, as you’ve identified, the interpretation of the questions and answers can be subjective.
Ultimately, the only way to get a genuine status determination is if a Status Assessor looks at all the facts in your engagement and comes to a conclusion (or a tax tribunal, should it get to that point). Everything else, HMRC’s CEST tool included, is simply giving a ‘best guess’ based on the information presented.
Third party tools (such as ours) have the advantage of having a human element sitting behind it to provide reasoned questions/responses in the event that a result is not clear-cut. I would, however, never say HMRC’s tool is pointless – it does provide a good starting point for understanding status, but I would not use it in isolation.
If you use the CEST tool, answer accurately, and it says you are outside of IR35, is this not enough, being that it’s HMRC’s own tool.
HMRC have said they will back any determination made by the tool, but the consideration to be made here would be that HMRC will only stand by a determination if it is factually correct.
Realistically speaking, the only way HMRC will validate this information is by launching an enquiry anyway, leading you back to square one in respects to status determinations. By all means, use CEST to help come to a conclusion, but do not use it in isolation.
If you are not 100% sure of the answer to a question when using Kingsbridge’s status determination tool, would it be better to provide the ‘negative answer’ then supply evidence so that there is a higher chance of assessment being borderline and thus reviewed by an IR35 expert? Or is there an option to request that an assessment is reviewed regardless, even if it is comfortably outside?
Any opinion provided by the Kingsbridge tool can be referred to our IR35 team to review in order to provide a clearer picture so you do not need to ‘engineer’ a borderline case. I would encourage notes to be added in any circumstance, just in case, but especially if you intend to pass it on for review, as this will help us understand your engagement, why you’ve referred it, and also ask the relevant questions in return if necessary.
I’ve been advised by my accountant to avoid using CEST unless an investigation has already been started. What’s your view on this?
I believe there’s no issue in using CEST (at any point – before or after an enquiry), but I would caution using it as the only means you use to determine status. Use it in collaboration with an independent assessment, or a third-party tool such as Kingsbridge’s.
Does the Kingsbridge Status Tool require the end client, agency (where applicable), and contractor to complete the assessments for a collaborative approach?
The Kingsbridge tool offers more of a collaborative approach, but exactly how collaborative is up to the user of the tool. There is the option to include the contractor’s input (which generally we’d advise as full transparency of the process can be very helpful), but, for example, the agency can take the lead on the use of the tool and simply send the completed SDS to the end client for them to check and verify, or they can sit down with the client and complete it together.
Different users will have different preferred levels of collaboration.
How to Ask Andy
If you’d like to ask Andy your own IR35 question (it can be on anything, not just status determination tools), you can submit it using our online form. Andy will do his utmost to answer you via this blog.
While you make your own preparations for the fast-approaching reforms, you should take a look at our IR35 Protect insurance. Our Premium Protect policy includes unlimited access to the Kingsbridge status tool. Alternatively, you can get an individual status assessment for just £50 plus VAT.
Our award-winning status tool combines a questionnaire with 29 to 34 questions, depending on the specifics of the contract, to ensure a complete picture of your assignment is built. Click here to find out more about the tool.
