Question to the HM Treasury:

To ask the Chancellor of the Exchequer, whether HMRC has made an assessment of the potential merits of updating its CEST tool used for determining employment status to account for Mutuality of Obligation in the determination of independent contract work.

‘Mutuality of obligation’ (MoO) is a term often used to describe the basic obligations that exist between a hirer and a worker. These basic obligations are where the hirer is obliged to pay remuneration, of any kind, and the worker is obliged to provide their work or skill in return.

MoO is important because without it there can be no contract for the supply of a worker. CEST does account for MoO on these terms and is clear in guidance to users that it can only be used to determine employment status for tax where there is such a contract in place. CEST then considers this contract, testing the employment status factors, and determines whether the engagement is more likely to be employed or self-employed for Income Tax and National Insurance contributions purposes.

After receiving feedback during user testing, HMRC provided a link to guidance on MoO on CEST’s landing page to make this understanding clearer to users of the tool. The guidance can be found on GOV.UK: https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm0543.