ESM11105 | Check Employment Status For Tax: Financial risk – Other costs

CEST asks ‘Will the worker have to fund any other costs before your organisation pays them?’ or ‘Will you have to fund any other costs before your client pays you?’

We ask this question to see if you have significant financial risk due to other costs. If that could result in you making a loss from the contract, this would be an indication of self-employment.

For further guidance on the financial risk questions see ESM11085

Where you have answered ‘yes’ to any other financial risk questions (vehicle, material, or equipment) do not answer ‘yes’ here if it is the same cost.

If a worker has any costs which are significant, are fundamental to the contract and the worker bears true risk of financial loss through incurring them, then that would fall within the ‘Yes’ category for CEST.

If a worker has costs which are not significant, are incurred through preference, or for personal use, are in any way reimbursed by the hirer or there is no true risk of financial loss this would fall within the ‘No’ category for CEST.

Where costs are borne equally by employees and the self-employed HMRC would not consider these to be relevant ‘other costs’ for the purposes of a financial risk. These would therefore fall within the ‘No’ category for CEST.

EXAMPLE

• Sandra provides work to various hirers, to do so she pays for a suitable business premises and travels to various engagers to demonstrate her products. If Sandra pays for business premises that is essential for her to complete the role, and this is a cost she bears, this is a financial risk.

• If Sandra pays for essential travel and accommodation to various locations for her presentations, these costs are significant and the hirer doesn’t pay for them, this is financial risk.

• If Sandra can work on the hirer’s site to fulfil the contract but has her own business premises through personal choice then this is not a cost that should be considered in CEST. This is the case even if Sandra does some work relevant to the contract in her own business premises.

• If the hirer pays for travel and accommodation, whether directly or through any kind of lump sum, these are not relevant costs for CEST. If Sandra chooses to upgrade her hotels at her own cost, these are also not relevant costs for CEST as she does so out of preference.

• Sandra is required to pay an annual professional membership and registration fee. Because both are incurred, and required, by employees and the self-employed alike these costs would not be relevant for CEST purposes.