IR35 and HMRC

What is the HMRC Check Employment Status for Tax (CEST) tool?

CEST is short for Check Employment for Tax, which is a resource developed by HM Revenue and Customs (HMRC) to assist in determining an individual's employment status for tax purposes, including compliance with IR35. It is only intended as guidance and does not carry any legal weight.

The tool was created several years ago when the legal landscape was different from what it is now, and it currently does not align with the law and should not be relied upon.

More detail

CEST, or Check Employment for Tax, was developed by HM Revenue and Customs (HMRC) to help determine individuals' employment status for tax purposes, including IR35 compliance.

The tool was created many years ago as a guide when the common law landscape was different. It is currently misaligned with the law and cannot be relied upon. Whilst HMRC claim the CEST tool was tested with stakeholders many years ago, those stakeholders were their internal inspectors, and the detailed analysis was not kept – an admission made by the head of HMRC to the Public Accounts Committee.

CEST was created in the eyes of HMRC's "policy view" of status, which was proven incorrect by the decision released by the Court of Appeal in April 2022.

HMRC have been shown in multiple instances that they will not stand by a CEST assessment, nor do they use it for formal enquiries.

It's important to note that while the CEST tool can determine IR35 status, it is not a guarantee of compliance with IR35 rules. HMRC has stated that the tool is not intended to provide a definitive answer, and that users should carry out their own assessments and take professional advice where necessary. The accuracy of the tool has been repeatedly disputed.

Given the inherent dangers of relying on a tool that HMRC don't use themselves, and the £263m worth of penalties issued to the public sector who used the tool, it has been described by some as "the most expensive free tool anyone will ever use."

We highlighted a full objective analysis of the flaws in the tool in a 40-minute webinar on June 2022, which is free to view online: https://www.ir35shield.co.uk/videopodcasts/videopodcast/cest-exposed-proof-that-hmrcs-ir35-tool-wont-protect-you

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