31 October 2018 
Caroline Jones, Employment tax director
Deciding employment status continues to be a thorny issue for many organisations, including HEIs. The message that HMRC are giving is that if you want a definite decision, that you know HMRC will not challenge, you must use their Check Employment Status for Tax tool (CEST). However, the questions posed by the CEST aren’t always suitable for HEIs and can result in unexpected/inaccurate results.
A recent Employment Tribunal decision has overturned the results of the CEST and, following this, it is possible that some HEIs may now face challenges from contractors, who have been treated as employees for tax purposes.
The Met Office had used the CEST and had determined that Tony Elbourn, a contractor providing his services through his Personal Service Company (PSC), via an agency, was within scope of the off-payroll working rules. PAYE had been applied to payments made to the contractor. Additionally, Employee Class 1 NIC and crucially, in this case, Employer NIC was also deducted. The case was brought by the contractor on the basis that he had suffered an illegal deduction, namely Employer NIC. Elbourn lost his appeal, on the basis that the presiding Judge, found him to be neither an employee, nor a worker, but self-employed. Although this is not a tax case it demonstrates how difficult it can be to determine employment status and that even the use of the CEST cannot always be relied upon when it comes to employment tribunals.
In order to assist HEIs we have withdrawn the common roles document so that it can be amended to take account of feedback we have received from members and HMRC, and supplemented with additional practical guidance via an employment status flow chart. The aim is to make this flow chart user friendly for those who are directly involved in engaging contractors, either as individuals or via PSCs, as well for payroll and HR staff, and to include questions which are more appropriate for HE than those in CEST.
If you have any further feedback on the original common roles document or are happy to share any decision-making documents that you use in your institution please contact Caroline.
