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HMRC has attracted further ire from contractors affected by plans to squeeze them for a bit more tax under IR35 rules.
After considerable prodding by contractor consultancies and other groups including freelance advisory service ContractorCalculator.co.uk, the tax agency last week released a new paper on Mutuality of Obligation (MOO) amid worries that its Check for Employment Status for Tax (CEST) service was inaccurate.
CEST - Sequence - Questions - HMRC - Contractor
CEST is a sequence of questions asked by HMRC to determine whether a contractor falls within the IR35 framework and is therefore likely to be hit by taxation as though they were directly employed by the client, but without any of the benefits full-time employment brings.
The problems come from MOO, which is legally a bit of a murky area (at least for HMRC it seems). In employment law, it refers to the obligation of the employer to provide work and the employee to accept it. A contract obliges the employer to pay and the employee to do the work.
CEST - Test - MOO - HMRC - Sector
CEST does not include a test for MOO since HMRC assumes it is present in all public sector contractor engagements due to a slightly whiffy interpretation of the law. If there is no MOO, then the odds are the contract will be outside of IR35. Unsurprisingly, HMRC has omitted it from CEST.
With plans to extend IR35 off-payroll working into the private sector, the omission of MOO from CEST is...
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