New Freedom of Information (FOI) data obtained by IR35 Shield reveals that businesses are continuing to move away from HMRC's IR35 tool, Check Employment Status for Tax (CEST), with usage falling by a further 43% during the 2025-26 tax year.
The latest data from HMRC shows that total CEST usage has dropped by 71% over the last two years.
Growing Concerns Over Reliability
The continued decline comes despite no changes to either the underlying legislation or the CEST tool itself. The CEST tool's underlying logic has not been updated since November 2019, despite several significant employment status judgments being handed down by the Court of Appeal in April 2022 and the Supreme Court in September 2024.
CEST still reflects HMRC's interpretation of employment status law from more than six years ago, rather than the current legal landscape shaped by subsequent tribunal and court decisions. Notably, the courts dismissed key HMRC arguments on control and mutuality of obligation, but the tool has not been updated.
Recent events have further highlighted the issues with CEST. In the case of Professional Game Match Officials Limited (PGMOL), the judge concluded that the engagements in question lacked the hallmarks of employment and that it was not a balanced case. However, when the facts are entered into the HMRC CEST tool, it concludes that the case is "indeterminate" and wrongly suggests it was finely balanced.
HMRC have not signalled any intention to update CEST to align with the modern case law.
One in Five Users Still Receive No Answer
The latest figures also show that approximately one in five users continue to receive an indeterminate result from CEST. For sole trader engagements, the indeterminate rate is even higher at approximately 24%.
Why Businesses Are Moving Away from CEST
The trend reflected in the HMRC data mirrors what IR35 Shield sees when speaking to organisations reviewing their off-payroll compliance arrangements.
Many firms tell us they are no longer confident that CEST provides the level of certainty required to manage modern IR35 risk, particularly as it does not fully reflect current case law and a high proportion of cases result in an indeterminate outcome.
As HMRC's own data demonstrates, the market is increasingly concluding that relying solely on CEST is no longer sufficient.
Businesses are also increasingly recognising that IR35 compliance is about more than generating a status outcome, and that robust compliance requires a combination of accurate status assessments, appropriate governance and training, contract reviews, and ongoing expert support in the event of HMRC scrutiny.
A Proven Migration Path Away from CEST
In IR35 Shield's experience, organisations seeking to strengthen their compliance by moving away from CEST find the migration process simple and quick.
IR35 Shield has a well-established migration path for businesses looking to transition from HMRC's tool to a more comprehensive compliance framework. We regularly help firms replace CEST-based processes with more robust solutions that provide greater certainty, stronger evidential support and improved protection during HMRC enquiries.
The majority of new organisations engaging with IR35 Shield are either removing historic blanket bans on limited company contractors or moving away from CEST-based solutions or others that are far too administratively burdensome.
The Direction of Travel Is Clear
The statistics demonstrate that CEST users are voting with their own feet, as the long-term decline in CEST usage shows no sign of reversing.
For organisations still relying on CEST as the cornerstone of their IR35 compliance strategy, now may be the right time to consider whether a more comprehensive approach is required.
If you would like to discuss migrating away from CEST and using IR35 Shield, then please get in touch to learn more about our CEST migration planning service.
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