Changes to IR35 CEST tool 'cosmetic'

For the first time in over four years, HMRC has updated the CEST tool for IR35 workers but critics say the changes are just ‘cosmetic’

HMRC confirmed that the check employment status for tax (CEST) tool has been amended to simplify the language, but only made the announcement via a gov.uk alert last week as part of a 13-page summary containing numerous tax updates designed to simplify administration of tax.

This document stated the aim was ‘to modernise and reform HMRC systems and processes to simplify the experience for individuals and traders’. The update to the CEST tool was included in this.

In the notice, HMRC said it was ‘revising its Check Employment Status for Tax (CEST) digital tool with effect from 30 April 2025. These changes will make it easier for CEST’s users to use the tool.’

This is the first update HMRC has released since November 2019, and that was only a relatively minor change since the tool was first launched in March 2017.

CEST has come in for criticism from self employed contractors using the service and advisors. It is currently available for use by hirers, workers, agencies and third parties to determine whether the individual taxpayer is allowed to work under IR35 rules.

Regardless of scepticism about CEST, HMRC is committed to the tool, a view that it reiterated in the latest update.

‘HMRC is committed to standing behind the outcomes of this tool where it has been used correctly,’ HMRC stressed. 

In addition, it has removed information for ‘some customers where special rules apply and covered this within the tool itself’.

To support these changes, HMRC will also publish revised guidance that ‘offers help on how to answer the revised questions’. Useful links have also been included for related guidance.

Dave Chaplin, CEO of IR35 compliance firm IR35 Shield said: ‘It seems the misfiring CEST car has spent the last 4.5 years in the workshop since its previous update in November 2019 — yet all HMRC’s mechanics have managed is a wash, a wax, and an air freshener hung from the mirror.

‘For firms that have already considered the CEST tool and decided against using it, there’s no need to revisit that decision. Fundamentally, nothing has changed.’

The CEST tool disclaimer states: ‘HMRC will stand by the result you get from this tool’, albeit with caveats for incorrect or misleading responses to questions.

Chaplin added: ‘Based on years of first-hand experience handling IR35 compliance checks, all the way to tribunal, I can confirm HMRC caseworkers consistently disregard CEST outcomes and instead focus — as they always have — on gathering the facts, reviewing the contracts, and applying the relevant case law.

‘A shinier exterior doesn’t fix what’s under the bonnet. For those serious about getting status right, using CEST doesn’t offer the protection some might claim.

‘Once HMRC releases the code publicly, we will be able to ascertain if they have fixed some of the serious flaws.’

The CEST tool provides the following determinations based on the information given by taxpayers, but it is still possible to be given an inconclusive response. When completed it delivers one of the following descriptors:

• Self-employed for tax purposes for this work;
• Employed for tax purposes for this work;
• Unable to make a determination (for employed or self-employed for tax purposes);
• Off-payroll working rules (IR35) do not apply;
• Off-payroll working rules (IR35) apply; and
• Unable to make a determination (for whether the off-payroll working rules apply).

The CEST tool is not foolproof and users may receive an ‘unable to determine’ result. If this happens, it is vital to contact a tax specialist or HMRC to clarify the determination.

The first page of the questionnaire still stressed in bold writing that ‘contrived arrangements’ and ‘answering questions in a way that is not correct…would be treated as evidence of deliberate non-compliance, which can attract higher associated penalties’.

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