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HMRC publish official stance on mutuality of obligation (MOO)

16/07/18 | Advice & Guidance, Government, Regulation

After a heavy interrogation from members of the IR35 Forum in December 2017, HMRC officials have since been required to publish a clarification of their position on Mutuality of Obligation (MOO) and what this means for those using Check of Employment Status for Tax (CEST).

HMRC have previously made assumption that any contractor being assessed via the CEST tool should have an automation to know the existence of MOO as it is “necessary for a contract to exist” but is that the case?

HMRC’s view is that MOO exists where consideration is made, and a basic requirement of all contracts is consideration, i.e. work in exchange for pay, and therefore, MOO exists in all contracts. Other points made in their statement include:

• The provision to terminate contracts without notice doesn’t affect mutuality of obligation
• Where work is provided and remuneration is paid, HMRC will assume that there is mutuality of obligation and that a contract exists
• The fact that the duration of a contract may be uncertain does not bear any impact on MOO whilst the contract continues
• Factors such as substitution and delegation should be considered when considering if a contract is consistent with an employment contract

To summarise the above, HMRC assumes that if CEST is used, MOO must already exist and does not need to be tested for, a belief that holds that it must exist in any contract whatsoever. As HMRC says: “Where work is provided and remuneration is paid, we will assume that there is mutuality of obligation.”

In the opinion of HMRC there is no single answer to determine one’s employment status and Mutuality of Obligation is only one indicator of employment and whether IR35 does in fact apply. With this in mind, it is important not to forget that each case will be judged separately via its own merits and therefore what may be significant in one employment status tests or IR35 case, may not be important in another.
Read the full official statement from HMRC here:


HMRC Statement


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