HMRC refuses to stand by its own CEST tool in tribunal case!
In the latest absurd twist in the scandal around the flawed “off-payroll” plans to force contractors into deemed employment, HMRC refused to stand by the result of its own Check Employment Status for Tax (CEST) tool – having tried and failed to have this evidence dismissed in an ongoing IR35 tribunal case.
In the case of RALC Consulting Ltd v HMRC, concerning the case of IT contractor Richard Alcock, HMRC’s legal representatives contested the findings of the CEST assessment, which had determined that IR35 should not apply. HMRC’s legal counsel had submitted that the tool was “of no assistance to the tribunal in determining the issue”.
In its application to dismiss the evidence related to CEST, HMRC argued: “The form, content and application of CEST to the appellant’s arrangements is irrelevant to the issues to be determined by the tribunal; namely whether the hypothetical contracts between Mr Alcock and the clients would have been contracts of service.”
One has to question why HMRC are on the one hand widely stating they will “stand by the result” of CEST and yet on the other, arguing in court that CEST evidence that points to “IR35 does not apply” are ‘irrelevant’.
HMRC had previously promised to stand by CEST determinations where questions have been answered accurately, a promise that appears to have been cynically broken when CEST doesn’t give the outcome that suits HMRC.
The taxman’s readiness to attempt to have CEST-based evidence removed from court is particularly disturbing for contractors, who could easily find themselves subject to challenges from HMRC having acted in accordance with its wishes.
This whole farce confirms fears that an ‘outside IR35’ CEST assessment doesn’t provide the certainty that HMRC and the Treasury have insisted it will – showing it is deeply flawed, something that many experts have been raising warnings about, warnings that so far have been ignored by tin-eared Treasury Ministers.
The substantive appeal will be heard in September 2019.
Dave Chaplin, Director of the Stop The Off-Payroll Tax campaign and CEO of ContractorCalculator said:
It is extraordinary that HMRC argued in a tribunal that the findings of their own CEST tool were of “of no assistance in determining the issue.
HMRC are acting in bad faith. They have consistently said they would stand by the outcomes of CEST, yet here they are arguing in court that these findings are irrelevant when it doesn’t suit them.
So the reality is that either HMRC are once again wrongly contesting the status of an individual who CEST accurately assessed as outside IR35 or if they are correct that CEST should have returned a different outcome in this case, it means that CEST was wrong and can’t be trusted. Either way, the situation is a farce and neither HMRC nor CEST can be trusted when it comes to assessing contractors’ employment status. This shows that the Government must now listen and halt plans to roll-out the controversial and flawed Off-Payroll Tax and launch an investigation into the way HMRC are behaving, before they waste any more public money on this ill-conceived war on contracting