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The updated CEST - is it fit for purpose?

David McManus

David McManus | Personal Tax Manager

Tuesday 3rd Dec, 2019

March 2020 Update - Off-payoll working legislation delayed until April 2021 due to COVID-19


Last month we reviewed HMRC’s Check of Employment Status for Tax tool after HMRC refused to accept NHS Digitals status determination outcomes that had been generated by their very own tool. Now with less than 20 weeks to go before the new off-payroll working in the private sector rules are due to come into effect in April 2020, HMRC have finally launched an updated CEST.

So, what’s changed?

In our previous article we reviewed the CEST in its unreformed state and explained how we, and many in the contracting industry, believed it had too many flaws and omissions to provide a reliable test of a worker’s employment status.

Improvements were promised by HMRC and have just been delivered with no great fanfare. So does the work done on the tool give us the confidence that it will produce a more reliable and accurate status determination than its original version?

Although there hasn’t been enough time yet to ‘road test’ it thoroughly, early feedback is that it still contains a mixture of good and bad elements.

There is no doubt that a considerable effort has been made by HMRC to make improvements and indeed they say ‘we have worked with more than 300 stakeholders to make CEST clearer, reduce user error and consider more detailed information’.

The output of all this endeavour has led to quite a substantial update with no less than 39 individual changes.

A walkthrough of the tool reveals that it is available for use by a worker, hirer or agency. There are now early questions in the tool which centre around the long running issue of substitution, moving on to the control issues of what, when, where and how work is done.

IR35 is about painting a picture

We see for the first time questions on some of the areas which ‘paint a picture’ of the working relationship, a key approach adopted by the Courts. So a worker’s financial risk is explored through a range of questions including payment arrangements, provision of equipment and materials, and how work is remediated.

Further questions delve into the worker’s involvement with the client designed to establish whether he or she is part and parcel of the client’s organisation.
The questions conclude with a focus on the worker’s contracts, trying to establish how the contract affects the worker’s ties and commitment to the client, what freedom there is to work elsewhere and the worker’s history of contracting.

Concluding the CEST brings the user to the decision page with the result capable of being printed off. HMRC stress that the information entered and the outcome are not retained on the system.

In common with the original version of CEST HMRC repeat that they will stand by the result of the outcome with the disclaimer that inaccurate information entered would invalidate this commitment.

CEST still fails to address Mutuality of Obligation

The first thing to mention is that a primary criticism has still not been addressed. The determination as to whether there is Mutuality of Obligation (MOO) between client and worker, a key factor referred to in countless cases taken before the Courts, is still assumed by HMRC to exist from the outset by the creation of the contract. The revised CEST gives no ground on this important point.

On a more positive note HMRC have provided users with far more by way of linked guidance through their Employment Status Manual. They have certainly made an effort here to explain their rationale and provided, we count, examples covering 25 different occupations!

Although the questions in the updated tool are far more comprehensive they still lack the nuances which are always present in working relationships and we fear that this shortcoming is a real handicap.

The positives and negatives of the CEST Tool

Weighing the balance then here are a few of the pros and cons:


  • Answering right to substitution questions no longer produces snap determinations based on a handful of yes/no options (but see below)
  • Part and parcel and financial risks sections of the tool help arrive at a more balanced view of the contractor’s status
  • Additional guidance on HMRC’s interpretation, flawed or otherwise, is helpful


  • MOO is not there and cannot be taken for granted
  • The substitution questions are still oversimplified
  • Although more ground is covered by extending the scope of the questions there is a propensity to overthink the answers to fit. There is still a lack of nuance.

So, how do we judge this update?

We have recently seen HMRC challenge the outcome of determinations arrived at by using the original CEST (NHS Digital) and that organisation’s reliance on it has not necessarily discharged its obligation to show ‘reasonable care’.

The upgraded CEST may be a step forward but it isn’t there yet.

We believe that the advantage of using an independent status review service like PayStream’s IR35 Comply is that we have a human being evaluating all of the information provided by the contractor, agency or hirer. This allows us to paint a picture of the overall working circumstances of the role before determining an IR35 status. That independent, specialist review satisfies the reasonable care requirement and can protect the individual or organisation involved.

To find out more about IR35 Comply either contact your local CRM or email

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Related article - The CEST tool - can you rely on it?

There is a doctrine in English law called ‘legitimate expectation’. It’s there to protect a person against a public authority resiling from a representation it has made. It is based on the principles of natural justice and fairness, and seeks to prevent the abuse of power.

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