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IR35 CEST Tool Updated… Kind Of

By November 22, 2023No Comments

HMRC’s Check Employment Status for Tax (CEST) tool – used by companies, agencies and contractors to determine IR35 status – has been heavily criticised ever since its creation in 2017. Experts have long warned that this controversial tool is unreliable, far too complicated and can actually pose a compliance risk.

Has HMRC listened to these concerns? Hmm, we might have to wait and see. It did issue some unexpected tweaks to the tool at the beginning of October and has said that this is the first phase in its two-step ‘CEST 2.0’ approach. But what exactly has changed? And do these changes address experts’ concerns? Let’s take a look.

CEST tool update: what’s changed?

There are four key changes that HMRC has made to the tool:

  1. It’s moved to a new platform called OCELOT
  2. The Employment Status Manual has now been incorporated into it
  3. Users can now review their answers at the end of each section (rather than only being able to at the end)
  4. Users will now be able to see the tool’s outcome for each question section

Do these changes address the tool’s fundamental issues?

No – unfortunately not. Whilst the updates focus on improving the tool’s usability and will help guide users through the process, they completely disregard the tool’s fundamental flaws and it’s therefore still falling short on what the tool actually needs.

In a conversation with HR magazine, Seb Maley from contractor insurance company Qdos warned individuals that “The crux of it is that despite the so-called updated version of CEST being released, businesses shouldn’t rely on it to determine the IR35 status of contractors or the employment status of sole traders. CEST is not mandatory and a second opinion is advisable.”

What about phase two?

It’s been confirmed that there will be a second phase of updates to the CEST tool, although it’s not known when this will be or what it’s likely to include. But let’s hope this additional phase will better address some of the tool’s flaws.

Where can you get help determining your IR35 status?

As we’ve mentioned above, the CEST tool has a bit of a track record for not being the most reliable or accurate tool… therefore, we strongly recommend that you also seek professional advice to help you determine your IR35 status. Our chartered accountants have a wealth of experience in dealing with the complex world of IR35. We’ll help you identify and defend your status, and we’ll help you navigate this ever-changing and complex legislation in order to ensure you remain compliant and tax efficient.

To find out more, please visit our Accounting Services for Contractors web page, our IR35 Advice web page or get in touch by requesting a free, no-obligation consultation with one of our experienced accountants today.

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