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HMRC finally admits “no detailed evidence to prove accuracy of IR35 Tax tool”

Dave Chaplin
tax returns

More than 100,000 people could be facing incorrect tax bills as HMRC admits it has no detailed proof to demonstrate that its Check Employment Status for Tax (CEST) tool is accurate. Contributor Dave Chaplin, CEO and Founder – ContractorCalculator.

The admission came following a series of Freedom of Information (FOI) requests as part of a five month investigation by contracting authority ContractorCalculator. HMRC has stonewalled a series of requests for evidence and information from ContractorCalculator but finally responded to say that the taxman holds no detailed test data at all: “The CEST tool testing was done by a workshop. 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.”

Following the release of CEST, HMRC has continued to champion its accuracy despite evidence from ContractorCalculator.  The contracting site tested CEST against the historic IR35 cases in March last year and discovered that HMRC’s tool was unable to return the correct outcome in 37 percent of cases.  More recently, at a BBC select committee hearing, it was revealed that CEST had failed 97 percent of BBC broadcasters who had used the tool, prompting Jolyon Maugham QC to dismiss HMRC’s efforts at trying to achieve an “impossibly difficult” task.

Poised to call for an immediate inquiry by the Public Accounts Committee into HMRC’s conduct following this discovery, Dave Chaplin, CEO and founder of ContractorCalculator said: “I am incredulous that a fundamental piece of the CEST jigsaw is missing.  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?

“HMRC 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. There is a very simple way they can resolve this challenge – just publish the results of the 23 court cases, as put through CEST and prove their claims.

“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 HMRC has to say in its defence, a defence that seems to be unravelling as we learn more.

People’s lives and livelihoods are in tatters, not just at the BBC, as has been widely reported, but in other public services too.  By forcing false employment upon people, HMRC could now face tens of thousands of claims for tax refunds and we won’t know what the scale of this is likely to be until January 2019 next year.  Could this be HMRC’s PPI scandal? It’s even more appalling that HMRC wants to roll-out to the private sector the very same IR35 rules that have caused this chaos in the public sector.  HMRC has significantly fallen down on its duty of care to businesses and tax payers.”