Skip to content 
Check Your Employment Status Tool CEST
The most critical variables for determining employment status are looked at to determine whether a contractor would fall under IR35. Consideration is given to whether or not an employment connection would exist if the contractor and the end client entered a hypothetical contract. However, the process of defining employment status depends on each case’s particular facts, and in certain instances, there may not be a definitive result. It is useful working through the HMRC’s employment status tool CEST for tax assessment and inputting choices to obtain insights into the different outcomes. In essence, if a contractor has identical working conditions, duties, and control as a client employee, they are likely to be classified as “within IR35” (i.e. the Off-Payroll Working Rules apply). But there may be an effect of case law which regularly evolves in tax tribunals, courts, and employment tribunals. The key considerations that determine a contractor’s IR35 status are as follows:
When proving that a contractor’s assignment is “beyond IR35,” a legitimate substitution option has long been considered an essential piece of evidence. The legality of substitution depends on the existence of a bona fide right to provide a replacement. This means the client must consent to it in practice, the contractor must pay for the replacement, and it should be an unconstrained right. The client must accept a replacement if the primary contractor cannot perform. According to HMRC, a client’s requirement to be satisfied that the successor has the requisite skills and expertise or to guarantee that the substitute is authorised under their security systems does not eliminate the right of substitution.
A contractor must have some authority over a project when providing professional services. The written contract and working practices must prove that the client cannot control how the contractor delivers their services.
These control parameters may indicate “within IR35” status:
Suggesting that someone will monitor the contractor.
Including any incentives that are offered to “employees” (including holiday or sick pay)
Including timings for starting, finishing, and breaks during the contract.
Contract clauses spell out the parties’ respective powers to exercise control or supervise the contractor.
It is up to the individual to ensure that the services are provided on time. If the client’s goals are met or the project is finished on time, the individual will have complete autonomy over the method and timing of their service delivery. It is important to note that any clauses about control should be included in both the first tier contract (which is the contract between the recruitment firm and the client) and the second tier contract (between the recruitment business and contractor).
This is a controversial area of law since HMRC’s perspective differs from numerous experts and case law. It is an obligation between the two people that they will both give and take work. A reciprocal obligation is straightforward to articulate within an employer and employee relationship. But in the contractor-client dynamic, things get murkier. Despite HMRC’s assertion that mutuality is created when two parties agree to offer services through a contract, most legal experts view the situation as more complex. In the following months, there will probably be more clarification regarding this matter.
Aside from these, there are also: providing necessary equipment, protocols for absences, the persistence of the engagement, agreements to end the relationship or contract, warnings or notice period and the contractor becoming an essential part of the company.
We welcome all contractors, locum doctors and engineers who were working under their limited companies before 2017 and were forced to use umbrella companies. Our team of qualified accountants and tax consultants have broad skills and experience across all areas of accounting, taxation, tax planning, savings, and business investment which they utilise to the best of their abilities to help your company and achieve the best possible outcome for you. If you want to meet with us, we have a team of qualified personal tax accountants who can meet over the phone, via video call, or in one of our offices.
Perhaps it’s time to look for a new accountant if you haven’t enjoyed such kind of assistance from your existing one? Our accountants will work with you or your business to ensure that all elements of your finances are handled proactively so that you can refocus on what matters most – operating your business!
