HMRC admits no evidence surrounding IR35 tool accuracy
HMRC have admitted that they have no detailed information with regards to whether their IR35 Check Employment Status for Tax (CEST) tool actually produces accurate tax bracket designations.
Contractors use the tool as a self-assessment test to see whether or not IR35 applies to them.
The results mean a significantly large number of contractors could still receive tax bills with incorrect values.
As a result, up to 40,000 individuals may have become subject to excessive taxation.
(Image credit: Wikimedia Commons)
What the officials have said
Replying to a Freedom of Information request submitted by ContractorCalculator, HMRC said, “The CEST tool testing was done by a workshop. Therefore, the only documented output of the workshops is the set of rules used by the tool.
“Our records show that HMRC has used the CEST tool to test all the cases cited in your request. But, we do not have a record of how each question was answered as part of the testing, only the end determination.”
Dave Chaplin, CEO of ContractorCalculator, said, “For a tool of such importance, the lack of rigour involved in its testing methodology is astonishing. You have to wonder if HMRC has shredded any evidence to cover up CEST’s shortcomings?
“[They] publicly claimed that the CEST tool gives the right result provided the correct answers are entered into the tool but have chosen not to document any of those answers used during their testing process.
“HMRC has taken a slapdash approach to building a tool that is clearly not fit for purpose, has not been tested properly and is missing important case law. HMRC tells us that it intends to release more information in April, so it will be intriguing to hear what [they] have to say in [their] defence.”
In 2017, HMRC claimed that IR35 law at the time could be responsible for lost tax of £400million.
Join us online: