HMRC suggest MOO to be included in CEST

Latest IR35 Forum Minutes

The latest IR35 Forum was held on 28th February this year with the minutes having recently been released.

The purpose of the IR35 Forum is toadvise on the administration of IR35 policy in practice. Meetings should be “constructive, open and professional,” however the latest IR35 meetings suggest that this is not necessarily the case.

Mutuality of Obligation

In preparation for IR35 reform in the private sector, this IR35 Forum was focussed on preparing for the change in legislation, with members expressing their concerns with impending reform.

One of the concerns which has been raised time and time again is regarding the mutuality of obligation (MOO) issue and the fact that this remains missing from HMRC’s CEST tool.

HMRC published a paper on mutuality of obligation last year which aimed to explain why MOO was omitted from the tool:

“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.”

The paper goes on to state that;

Where work is provided, and remuneration is paid, we will assume that there is mutuality of obligation and that a contract exists. We will consider whether this is an employment contract or a contract for services. We will be sceptical of an assertion that no mutuality of obligation – and logically no contract – exists in these circumstances.”

This approach to MOO is however hugely flawed.

A further discussion paper was issued to Forum members prior to February’s meeting, including discussion around the Jensal case – an IR35 case won by Qdos Contractor in 2017 – among others, to which “HMRC will work with members and stakeholders to consider how mutuality of obligation can be included in CEST,” and forum members are required to provide feedback on HMRC’s revised paper by 7thJune.

This is a positive step forward given HMRC’s past insistence that MOO should not be included, however we will not be holding our breath.

Non-Compliant Intermediaries

Forum members also expressed concerns regarding non-compliant intermediaries; the latest model to circumvent the rules, whereby organisations add another intermediary into the supply chain.

HMRC appear to acknowledge and intend to raise awareness of what constitutes non-compliance, also pointing to their specialist team for enforcing the employment intermediaries legislation.

Reform Guidance

The guidance surrounding the change in legislation was raised during the meeting with members stating that further technical guidance is needed. HMRC responded by stating that, “these details are available in the supporting technical notes and ESM.”

One of the latter discussions during the meeting was regarding a ‘discrepancy’ in HMRC’s figures concerning the impact of non-compliance (£1.3 billion in 2023-34) and the estimated amounts of additional revenue in the same year, (£725 million in 2023-24)to which HMRC responded;

“There is no discrepancy. There is normally a difference between the estimate of Exchequer cost of non-compliance and the estimated yield from measures to address it because of a range of factors including behavioural impacts and the design and scope of a measure.”

The debate over IR35 reform remains very active within the House of Commons and Paul Sweeney, Shadow Minister for Scotland, pointed out in response to Mel Stride, during a debate on 21stMay that;

“The Treasury has claimed that the off-payroll tax should not affect the genuine self-employed, yet HMRC’s Check Employment Status for Tax tool assessed 3,909 contractors across five key public sector bodies and the results were that 94% of the contractors were deemed to be employers. That clearly demonstrates that the CEST tool is leading to the wrong decisions. Will the Minister now agree to cease the use of the CEST tool and to put on hold those plans to roll it out to the private sector?”

Mel Stride responded by stating; In 85% of cases, it does give a determination. HMRC will stand by that determination provided the right data was put into the CEST process”– little comfort to those that the legislation impacts.

This article was written by Kate Cox, Senior Employment Status Manager at Qdos Contractor – leading IR35 advisory and contractor insurance experts.

1 Comment

  • Soprano says:

    Although it’s more dishonesty in his case, Stride’s reply paints the impression that he’s an imbecile.

Leave a Reply

Your email address will not be published.

★ ★ ★ ★ ★

Very pleasant. Excellent price for what I needed. I will be a returning customer.

Rhino Review

Mr Paul D

Great staff. Customer focused and a team who recognise and understand their customers 100%.

Rhino Review

Vijay S

Fantastic accountants who helped me submit my last 2 years personal tax returns! I really rate this company!!!

QAccounting Review


Fantastic service.

Rhino Review

Marco G

Been with QAccounting for several months now, very good service, very personal and the best prices I have seen.

QAccounting Review

Muhammed A

I switched over to QAccounting a few months ago and haven't looked back. I get to speak to my own client manager and accountant, the prices were the best I had seen, and I paid exactly what it said online (no extra costs). Very happy with QA.

QAccounting Review

Jeremy H