Schroders using CEST to set contractors’ IR35 status

Schroders has become the first financial services company to rely on CEST to set the IR35 status of limited company contractors for April 2020’s changes, ContractorUK has learnt.

In fact, despite the tool being responsible for incorrect IR35 determinations by the NHS, the asset management firm is now using CEST as the sole method to decide its PSC workforce’s status.

But having received an ‘inside’ determination from it, one disappointed PSC at Schroders believes Check Employment Status for Tax (CEST) must still be producing incorrect results.

“I cannot see how I’m considered to be an employee when [I’m eligible for] no sick pay; no holiday pay; no pension and no other benefits,” the contractor said.

An agency source with experience at placing contractors at Schroders and other asset management firms sounded less surprised by the PSC’s ‘IR35-caught’ verdict, however.

In fact, any use of an automated invoicing system (as opposed to PSCs raising invoices themselves), and potential caveats on substitution clauses could make ‘outside IR35’ status difficult to achieve, the source said.

Out of these two status indicators, CEST assigns much more weight to substitution, as PSCs who can substitute; who pay the sub and whose sub is accepted by the client are determined by the tool as outside IR35.

Schroders’ use of CEST emerges in the same month that advisory WTT Consulting said the tool contained “shortcomings”; accountant Gorilla Accounting said it needed “immediately reviewing,” and contractor body IPSE said that, in light of the Fospero case (which was largely decided on Mutuality – a factor CEST fails to test for), it was now ‘fatally undermined.’

At Schroders, the PSC said: “CEST somehow seems my role as in scope.

"I’ve told [my agency that] CEST is flawed, and they know the tool is due an upgrade yet they still say it’s fit for purpose right now. I’d like to know why you need to upgrade something that is already fit for purpose.”

Schroders has been invited to comment but was unable to do so before ContractorUK went to press.