HMRC’s Check Employment Status for Tax (CEST) tool has been exposed as biased and hopelessly unreliable, after a comprehensive re-testing of HMRC’s CEST test data obtained under FOI by ContractorCalculator, which HMRC and the Treasury are consistently relying upon to back up their claims that the tool is accurate. Contributor Dave Chaplin, CEO and Founder – ContractorCalculator
Following an initial 14-month investigation into CEST involving multiple Freedom of Information (FOI) requests, HMRC finally provided ContractorCalculator with all the documented test data they had. This consisted of just one-page simply listing each tribunal court case, the judgment and the supposed status assessment reached when run through CEST. HMRC had previously maintained that there was no further documentation in existence other than this one page to support the validity of its claims.
HMRC’s FOI response, which both the taxman and the Treasury have been relying upon to back their claims of CEST reliability, portrays the tool as largely accurate, even though it contained two assessments which were inconsistent with the judge’s court decision.
An expert status lawyer analysed all of the court cases, by using the 557 pages of the court judgments available in the public domain, and discovered that not only were HMRC’s testing claims woefully incorrect, but that the CEST tool is heavily biased towards pushing people into being incorrectly taxed as a “deemed employee”.
Re-testing has revealed:
- CEST only returned a properly correct outcome in 14 out of 24 cases – just 58 percent.
- 7 cases (29 percent) resulted in CEST giving the wrong answer.
- 3 cases gave the right answer, but for the wrong reasons – called “false positives”
- 3 of the cases passed demonstrated an over-reliance on substitution, which otherwise would not have produced the correct result, contrary to the courts direction.
Dave Chaplin, CEO and founder of ContractorCalculator said: “HMRC claims to have conducted rigorous testing of the tool and sent us just one piece of paper from those testing sessions, the only output HMRC had which is being used by both HMRC and Treasury to back up its claims that the tool was accurate.
“We have now conducted extensive testing to the level of rigour that should be conducted for systems of this importance, resulting in 690 pages of comprehensive testing documentation, to prove our claims. HMRC appears to be 689 pages short of the mark when it comes to its claims of rigour.
“HMRC and the Treasury often refer to the fact that CEST gives an answer in 85 percent of cases as being somehow demonstrable of its reliability. You could flip a coin that gives an answer 100 percent of the time, and it would be almost as accurate as CEST, but a coin flip isn’t a great arbiter when it comes to matters of employment case law. And neither is CEST.
“HMRC and the Treasury are now in a position where they cannot claim CEST is accurate, nor that it aligns with the law. We already know that a fundamental part of case law, mutuality of obligation, was purposely omitted from the tool. At best, all HMRC can really claim now is that it gives an answer which can only be half relied upon. This is not something you should consider asking 5.7m business to rely upon if the legislation is rolled-out into the private sector.
“HMRC has a duty of care to ensure that the public pays the correct amount of tax. CEST clearly doesn’t provide this and is designed to deliver the maximum amount of tax by falsely encouraging firms to overtax their workers. HMRC has no authority to create digital tools which override the law. Its actions here are a complete abuse of power.”