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CEST test rejected by employment tribunal
by Susie Hughes at 11:21 16/10/18 (News on IR35)
An assessment by the controversial online status test, CEST, has been rejected by judge as the contractor is now seeking to reclaim 'unlawfully deducted tax'.
The contractor has successfully used an employment tribunal to prove his outside IR35 status, according to contractor authority, ContractorCaluclator.

Business analyst, Tony Elbourn is now reclaiming thousands in overpaid tax, in a case during which the tribunal Judge ruled Mr Elbourn was self-employed.

This decision contradicted the result previously given using HMRC’s Check Employment Status for Tax (CEST) tool, which had wrongly concluded that IR35 applied to his engagement.

Mr Elbourn appealed to the tax tribunal for unlawful deduction of wages, during an engagement with agency Qualserve Consulting Ltd and end-client the Met Office, on the basis that employers National Insurance contributions should not have been deducted from his rate.

However, Mr Elbourn lost his appeal on the basis that he was found to be neither an employee, nor a worker, but self-employed – meaning IR35 could not have applied to the engagement.

In securing legal proof of his employment status, Mr Elbourn managed to prove that an estimated £9,500 was wrongly deducted from his income by the client and agency, who treated him as ‘employed for tax purposes’ under the Off-Payroll rules. As a result, the respondents are compelled to repay the sum deducted.

Presiding over the case Judge O’Rourke concluded: “He [Elbourn] was given a project and, apart from a weekly meeting to check on progress, he was his own master.”

Hammer blow

Dave Chaplin from ContractorCalculator, said: “This case marks a hammer blow for HMRC. CEST’s accuracy has once again been called into question, in a case where the contractor’s self-employed status was never in doubt.

“Moreover, the case has presented thousands more contractors, who have been overtaxed due to Off-Payroll, with a straightforward means of recouping what is rightfully theirs.

“Bizarrely, in this case, even though the client had decided using CEST, that he was a 'deemed employee', they then put up a defence claiming that he was in fact self-employed. Whatever the Judge decided Elbourn would effectively win. Either he would be found outside IR35, or be found to be an employee or worker, in which case the employers NI would have been an unlawful deduction.

“Though HMRC continues to champion CEST’s accuracy, I expect many cases where a Judge makes a status decision that contradicts CEST. This case adds to the mound of evidence already available demonstrating that HMRC’s tool is woefully inaccurate and should now be withdrawn.

“This judgment comes just weeks ahead of the Chancellor’s Budget and I hope will make the Government think twice before ploughing ahead with its plans to announce its roll-out of the off-payroll reforms into the private sector. The Government has enough on its plate with Brexit. It would be shooting itself in the foot if it goes ahead and extends this damaging legislation to the private sector.”

Further information
For more information about the controversial IR35 tests and rules; and other aspects of IR35, see Shout99's News on IR35 section.

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Susie Hughes © Shout99 2018

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