Contractors and the self-employed are being routinely misled by an official Government tool which is meant to give clarity over employment status.
According to a 14-month investigation by advice website Contractor Calculator, HM Revenue & Customs’ “check employment status for tax” (CEST) tool comes to the wrong conclusion in almost half of cases.
Experts say confusion over changes to the law introduced last year mean many genuine contractors are forced to pay tax as if they were employed without receiving benefits like holiday and sick pay.
He added: "HMRC is failing in its duty of care to make sure the right amount of tax is collected. It seems HMRC is trying to get the most amount of tax rather than the right amount. These people are being forced into false employment.”
It found that the CEST tool was only accurate in 14 of the 24 cases reviewed and was wrong in seven instances.
The change shifts the responsibility from the contractor to the hiring organisation, resulting in many large organisations making so-called blanket decisions and wrongly classifying workers as inside IR35.
This may result in contractors paying income tax at a higher rate, as opposed to corporation tax which is usually lower.
A spokesman for HMRC said: “The CEST digital service was rigorously tested throughout development, with input from external stakeholders, in accordance with government data standards prior to release. Results have been tested by HMRC against known case law and settled cases.”
Source : https://www.telegraph.co.uk/tax/self-employed/hmrc-contractor-tax-testing-tool-wrong-almost-half-cases/