Since 6 April 2021 large and medium sized organisations, based on the Companies Act criteria, have had to determine whether or not a worker supplying his services via their own personal service company would be treated as an employee if directly engaged. This replaced the IR35 Rules for these larger organisations.
HMRC suggests organisations use their Check Employment Status for Tax (CEST) tool on their website to check the worker’s status, although that is not obligatory. The tool is an interactive database of questions and will normally provide a ruling after 15 to 20 questions depending on the answers given about the contractual relationship.
See: Check employment status for tax – GOV.UK (www.gov.uk)
HMRC has recently confirmed that they will be bound by the result of the software provided the information is accurate and it is used in accordance with their guidance.
See: ESM11010 – Employment Status Manual – HMRC internal manual – GOV.UK (www.gov.uk)
HMRC has also stated that they will not stand by results achieved through contrived arrangements that have been deliberately created or designed to get a particular outcome. They would see that as deliberate non-compliance, and potentially levy financial penalties.
Note that the end user organisation is required to issue a Status Determination Statement to the worker with a copy to any agency to be passed to any fee payer in the labour supply chain making payments to the personal service company.
For help or advice, please contact the Tax Team on 0161 761 5231 or email theteam@horsfield-smith.co.uk.
