ESM11100 - Check Employment Status For Tax: Financial Risk - Material Costs

CEST asks 'Will the worker have to buy materials before your organisation pays them?' or

‘Will you have to buy materials before your client pays you?�

Ìý
We ask this question to see if you have significant financial risk from material 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

If a worker has to supply substantial materials and either cannot obtain reimbursement or faces the risk of financial loss should the contract not be paid, this falls within the ‘Yes� category for CEST.

If a worker incurs costs on small or incidental items such as stationery, low cost consumables (such as fuses, nails, paint, shampoo etc.) or items which are not a lasting part of the final product, then this would fall within the ‘No� category for CEST.

EXAMPLE
  • Piotr is engaged to perform a task. »Ê¹ÚÌåÓýapp hirer supplies materials to Piotr at cost price amounting to approximately 5% of the income he will receive for undertaking this work. »Ê¹ÚÌåÓýapp cost of these materials is not significant. »Ê¹ÚÌåÓýappse costs should not be considered when completing CEST. Ìý
  • Anita is engaged to perform a task. Anita must provide all the materials that will be used in producing the end product. »Ê¹ÚÌåÓýappse materials are bought by Anita at her own expense and are bought before any payment is received. »Ê¹ÚÌåÓýappse materials cost approximately 40% of the income she will receive for undertaking this work. »Ê¹ÚÌåÓýapp materials form a lasting part of the product, and the cost is significant, so these costs should be included when completing this CEST question. Ìý
  • Petra is engaged to perform a task. Unlike Anita, Petra charges her engager/hirer the cost of the materials to be used up front, so effectively the hirer has paid the cost of the materials to be used in the completed product. »Ê¹ÚÌåÓýappse material costs should be ignored when considering this CEST question. Petra has not been subjected to financial risk in relation to the materials used