Assessing contractor status – are you using CEST?
Since April 2017, public sector bodies who use contractors and freelancers have been responsible for assessing their tax status under the off-payroll working rules. These rules shifted the responsibility from the individual to the end client. If the individual is deemed an employee, the client has to deduct tax and national insurance through PAYE and pay employer’s national insurance contributions.
The government intends to extend these rules to the private sector in April 2019. This change was delayed amid criticism of the difficulty in assessing status. Despite the political uncertainties, it is expected that from 6 April 2020, private sector organisations will be responsible for applying the rules to their contractors and freelancers. The rules will only apply to medium and large organisations, as assessed on financial measurements and headcount. The current IR35 rules will continue to apply to small businesses.
This is a complex area of law. Businesses can use the government’s online tool, Check on Employment Status for Tax (CEST) for an assessment of an individual’s status. Following concerns about its accuracy, CEST was updated in late November 2019. So long as the information is provided honestly and accurately, HMRC says it will be bound by an assessment by CEST.
We can help you take practical steps now to prepare for these changes by reviewing your contracts and working practices to advise you on how to remain outside the rules and how to mimimise the impact.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.