DNS-Accountants

Tribunal Judge Rejects HMRC’s Online CEST Tool: Everything You Should Know

A tribunal judge has rejected HMRC’s CEST results, where the employment of a Met Office contractor was wrongly classified falling under IR35. Here is everything you should know about this verdict.

Recently, an employment tribunal judge has rejected HMRC’s Check Employment Status for Tax Tool (CEST), where the contractor has successfully proved that he was wrongly caught by the IR35 rules and reclaimed thousands which was in overpaid taxes. The judge has clarified that the contracting professional was self-employed, which further contradicted the results given by the controversial assessment tool.

Tribunal Judge rejects HMRC’s Online CEST Tool: Everything You Should Know

What is the case?

This case revolves around Tony Elbourn, a business analyst who was associated with recruitment and consulting firm Qualserve Consulting Ltd. to work with a public sector body named Met Office between August 2017 and January 2018 on a contract basis. However, Tony was later treated as an employee for tax purposes, and several taxes were deducted from his wages. According to the off-payroll working rules, he had to bear unlawful taxes and national insurance deduction from his pay.

The unlawful deduction made Tony Elbourn to appeal to the employment tribunal for a fair treatment reclaiming the deductions which according to rules were wrong. It is generally seen that many end-client companies deduct employers’ as well as employee’s National Insurance Contribution from the contractor’s rates, which is an unlawful practice as per the off-payroll rules is laid for public sector contracts.

HMRC’s CEST results proven wrong

Tony first appealed to the client, where it was decided that he was a ‘deemed employee’ (falling inside IR35 Rules) after using the HMRC’s Check Employment Status for Tax Tool. While putting up its defence the Met Office later claimed at tribunal that Tony was in fact a self-employed professional. This further gave Tony a legal proof to his employment status that he isn’t a worker or an employee but a self-employed professional who doesn’t fall inside IR35. This ensured that HMRC’s CEST assessment results are proven wrong in the case of Tony Elbourn.

What is HMRC’s ‘Check Employment Status for Tax’ tool (CEST)?

HMRC’s ‘Check Employment Status for Tax’ tool (CEST) is nothing but an online assessment tool which helps you determine your employment status for tax purposes, i.e. determine whether your employment falls in IR35 status or not. This assessment tool is based on a series of questions, the answers of which determine the final results. However, this tool has been criticized by experts at various instances.

The Final Verdict by Tribunal Judge

Judge O’Rourke found that the tax and deductions are unlawful as Tony Elbourn is a self-employed, which meant that his engagement doesn’t fall under IR35 rules. Also, the presiding tribunal judge rejected the results of HMRC’s CEST tool. “Elbourn was given a project and, apart from a weekly meeting to check on progress, he was his own master,” concluded the judge while giving the verdict in favor of Elbourn.

Commenting on the verdict, Dave Chaplin, CEO of ContractorCalculator stated, “This case marks a hammer blow for HMRC. CEST’s accuracy has once again been called into question, in a case where the contractor’s self-employed status was never in doubt.”

“Moreover, the case has presented thousands more contractors, who have been overtaxed due to Off-Payroll, with a straightforward means of recouping what is rightfully theirs,” he added.

What’s Next?

According to Tony Elbourn, an estimated £9,500 was unlawfully deducted from his wages in the form of taxes and towards national insurance contributions. And now, after the verdict the organizations are obliged to repay the sum deducted to Elbourn.

This ruling has came weeks before when the Government is expected to officially announce its plans to completely roll-out ‘Off-Payroll’ rules to the private sector by April 2019.

IR35 Test
Speak with an expert

Any questions? Schedule a call with one of our experts.

About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.

  • Book a free consultation
Receive accounting news and updates in your inbox

About the author
Blog Author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.

DNS-Accountants

See how dns can help
you today.

Save tax
Save tax

Our experts will work with you to reduce your corporation, personal or any other tax liability, all within the rules of the UK tax legislations. We’ll ensure you’re claiming all allowances and expense claims that you would be elegible for.

Reduce your admin
Reduce your admin

We give free software to all of our clients. You’ll be able to raise sales invoices, snap pictures of receipts and be MTD compliant with ease. You can even manage your business anywhere there’s an internet connection, thanks to our mobile app!

Grow your business
Grow your business

Successful business owners are those that are on top of their numbers. Businesses are driven by the numbers behind them. If you’re not reviewing your profit & loss or balance sheet regularly, how would you know how your business has performed and how would you make proper business decisions? We can help you make sense of your numbers.

Free Business Software!

Limited time only!

Free Business Software

Say Goodbye to Bookkeeping Hassles: Nomi offers Free Receipt Processing and big savings!

  • Built in payment solutions.
  • Track profitability, debtors and creditors
  • Snap pics of receipts with the mobile app
  • Free Receipt Processing
  • Hasslefree Bookkeeping
  • Cost Reduction
Get Started
Close nomi