How do you know if I have been caught by IR35?

So, what is CEST, and how does it work?

As most of you know already, the government want to introduce IR35 to the private sector from April 2020. However, the question then is ‘how do I know if I am caught by IR35’?

To help work out whether or not a particular contract falls within IR35, HMRC released an online tool shortly before the public sector rollout in early 2017.

The CEST tool will work out whether or not “a worker on a specific engagement, should be classed as employed or self-employed for tax purposes.”

Using a multiple choice system, the CEST tool (Check Employment Status for Tax) collects information relating to the individual, such as:

• Does the contractor provide their services via a limited company?
• Is the contractor an ‘office holder’?
• Can the worker provide a substitute (or have they already)?
• To what extent does the client exert control over the contractor, e.g. can they move the contractor to a different role/location, decide how and when the work is done, etc.?
• What happens if the client is unhappy with the contractor’s work?
• How is the contractor paid – fixed price, or by the time period?
• Does the contractor receive any ’employee’ type benefits from the client?

Once the answers have been processed by the CEST tool, you will be told whether or not the Intermediaries Legislation (IR35) applies to this particular engagement.

You will be able to read and download a summary of your answers, and how HMRC has interpreted its understanding of IR35 as it relates to each employment status factor.

If you’re caught, then the engager becomes responsible for operating IR35, and if not – you can carry on operating outside IR35.

In some cases – the tool will be unable to determine employment status at all.