HMRC's IR35 tool leaves a 'staggering' 210,000 contractors 'in limbo'
Figures from HMRC show that their own IR35 status online tool fails in one in five cases to determine the IR35 status of contractors.
The information published by HMRC under a Freedom of Information release shows that between November 25 2019 and May 31 2021, the Check Employment Status for Tax (CEST) tool was used 1,018,250 times, with the following results:
- 499,974 contractors were deemed outside IR35
- 308,176 were deemed inside IR35
- 210,100 were undetermined
Flaws
IR35 tax experts, Qdos, claimed that the 'damning data' exposed the flaws in the CEST system.
Seb Maley from Qdos said: "I'm astonished that the Government still stands by an IR35 tool that hasn't been able to make up its mind over 210,000 times.
"Here we have proof that CEST has left hundreds of thousands of contractors and businesses in limbo, unsure of whether a contract belongs inside or outside IR35. It should be the final nail in the coffin for this fundamentally flawed tool.
"I'm interested to find out what has happened to these engagements. Have HMRC got the resource - not to mention expertise - to offer support on this scale? I doubt it. The staggering number of undetermined results leads to confusion, delay, and in many cases, non-compliance.
"It's important businesses realise that CEST is not mandatory. And not only is it indecisive, its flawed logic - which isn't aligned with IR35 case law - and lightweight nature means the decisions it does make should be checked by an expert."
The information on CEST figures is available here, as a Freedom of Information release from HMRC.