HMRC recently released an updated version if its CEST tool. This tool is used extensively in the public sector by clients in determining the status of the contractors their hire. There is general outcry against the CEST tool – with reports suggesting that the tribunal decisions don’t match what the tool suggests. We taken such assertions with a bucket of salt.
As we see it, its quite easy to respond to the tool in a manner that generates an Outside the intermediaries legislation decision. The challenge is to actually mean it and be able to defend each response when giving evidence in a tribunal
Over the next few weeks, we will be focussing on some of the key questions of the CEST tool. We will look at what response aids an outside IR35 decision. But more importantly, what does it take to answer the question that way. The question we focus on, this week is the one in respect of office bearer responsibilities.
Will the worker (or their business) perform office holder duties for you as part of this engagement?
HMRC provide guidance which states that office holder duties do not refer to the physical place of work, but rather, it is about the responsibilities held by the worker within your organisation. This includes, being in a position of responsibility, such as a board member, treasurer, trustee, company secretary etc. If you answer yes to this question, the CEST tool will automatically end its computation and will declare the role as being inside the intermediaries legislation.
What does it take to answer this question as “No”
In order to avoid saying yes, even if the worker is performing office holder duties, consider some of these questions.
Is it complementary skills?
It can be difficult for senior contractor roles not to become office bearer roles, in some form or another. However, one way to get around this is by making it clear that these are complementary services. The office bearer should be providing additional services to an office bearer employee, rather than ‘being’ the office bearer.
Top tip: An adviser to an officer bearer, is a great example of a role that is not strictly an “office bearer” but allows you to obtain the services relevant to an office bearer, on an interim basis.
Are they making recommendations?
If the senior interim is simply offering an opinion, and the employee can choose whether to accept it or not, they could be seen as an advisor, rather than an office bearer. Contractors performing a role in such a capacity should wary about making their role very subjective or arbitrary, else the role may not remain substitutable. We would recommend that you build decision making processes and / or models that lead to decisions.
Can you get advice elsewhere?
If you are a hirer of advisors to office bearers on an interim basis, you may want to consider procuring advice on a one-off or retained basis as a service, rather than a contractor filling the position. There are companies who offer Virtual CxO services, such as The FD Centre, who provide virtual/part time Finance Directors or Freeman Clarke, who provide part-time IT Directors. With the right terms of reference and contract, it is much easier to not fall flout of “office-bearer” requirement of the CEST tool.
Knowing how to answer the questions on the CEST tool will help ensure your contractors meet the requirements. Stay tuned for our next blog, as we will be looking at more questions from the HMRC Cest Tool.