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IR35 and CEST Update


The IR35 story continues to rumble on taking twists and turns along the way and most of us believe it is inevitable that the reform will be introduced to the private sector.

Recent press stories have highlighted areas that are prime for improvement, not least of which is HMRC’s online tool Check Employment Status for Tax (CEST).

CEST is an online tool by HMRC which presents a series of questions to help determine your employment status for tax purposes, ultimately your IR35 status.

The CEST tool was developed for the off-payroll working rules that were introduced for the public sector in 2017 to assist public sector bodies with determining their contractors’ IR35 status under the new rules.


CEST has been the subject of a number of criticisms, including:

Lack of key status tests

HMRC do not decide what determines employment status. IR35 is based on historic case law with HMRC’s criteria being their interpretation of that. Critically, Mutuality of Obligation (MOO) is omitted from the CEST tool. Mutuality of Obligation refers to the obligation of the employer to provide work and the obligation of the individual to accept the work.

HMRC assumes that MOO is present in all public sector contractor engagements. If there is no MOO, then it is highly likely that the contract will be outside of IR35. So, not surprising it was omitted from CEST. HMRC’s paper on MOO can be read here.

Over reliance on substitution

So much importance has been placed on the Right of Substitution test, that it is likely that a pass or a fail of the CEST tool could be reliant on these questions alone.

Discrepancies in criteria

Discrepancies in the Right of Substitution questions in the CEST’s IR35 determinations changes the situations which are considered acceptable.

Lack of context in its determinations

This is a limit of a lot of digital test platforms, where answers to pre-set questions are taken at face value and no context is taken into account.

Lack of depth in its questioning

The CEST tool asks a maximum of 16 questions about a contractor’s work arrangements before reaching a conclusion about the contractor’s off-payroll tax status. This is only a fraction of the number of questions asked during a HMRC IR35 enquiry.

Failed CEST test

Recently, it has come to light that CEST was not formally assessed under the Government Digital Services Standards. Standards which are designed to check whether a service is good enough for public use.

This finding was revealed in a response to a Freedom of Information (FOI) request by

The FOI revealed that HMRC and the Cabinet Office claim there is no evidence that any formal assessment had taken place, nor that a formal assessment was required.

The Government Digital Services Standards are a set of 18 criteria to help government create and run good digital services. Point 18 – Test with the Minister states Test the service from beginning to end with the minister responsible for it.’

To keep up-to-date with the developments in IR35 and CEST we recommend following


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Related Articles:

How Tax Enquiry & Legal Expenses cover can help you in the event of an IR35 investigation

PCSs inside IR35 – Keep calm and carry out some research!

What is IR35 and how does it affect you?


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