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Absence of MOO test criticised in IR35 status checks
by Susie Hughes at 17:44 06/07/18 (News on IR35)
The Government has defended the fact that CEST (Check Employment Status for Tax), its online IR35 status assessment tool, doesn't take into account one of the 'fundamental factors' when assessing status.
The CEST tool has been much criticised at many levels by tax specialists and contractor representative groups for giving false results or not taking the whole picture into account.

One of the 'missing' factors has been 'mutuality of obligation', something that is generally deemed to be a key component when setting IR35 status. Like most issues in IR325, nothing is a 'golden bullet', but rather a series of circumstances and factors which come together to make the whole picture.

The concerns were raised at the industry/HMRC IR35 Forum at its December meeting and clarification from HMRC was sought. HMRC's position has been outlined in a short report - here.

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It explains that CEST does not explicitly look at MOO, as 'it is assumed that a person using CEST will have already established MOO, which is necessary for a contract to exist, otherwise there would be no need to be using CEST to determine the status of the existing or hypothetical contract.'

Tax specialist, Qdos Contractor's CEO, Seb Maley said: “Mutuality of obligation is one of the fundamental factors to take into consideration when setting IR35 status in accordance with the legislation, so that CEST omits this shows right away that the tool is not fit for purpose.

“MOO isn’t present in every contractor engagement, so to make an IR35 decision assuming that it is casts doubt over the hundreds of thousands of answers the tool has provided.”

“While it’s wrong of HMRC to assume that MOO exists in every contract, few IR35 cases are won and lost on these grounds. In court, control and personal service seem to hold more importance than MOO.

“HMRC might be short-sighted enough to claim that MOO is not needed in CEST, but they simply cannot ignore the fact the tool’s logic with regards to control and personal service also needs to be improved dramatically.”

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Susie Hughes © Shout99 2018

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