HMRC’s online IR35 status checker tool CEST not updated in five years, FOI confirms
Despite a previous pledge that HMRC’s IR35 online status checker tool will be continually updated as employment cases and tribunals occur, a freedom of information request confirms CEST has not been updated since October 2019
HM Revenue & Customs (HMRC) has sought to dismiss concerns about its online IR35 status checker tool not being updated for five years by emphasising how “rigorously tested” the much-maligned tool is.
A Freedom of Information (FOI) request, lodged with HMRC by off-payroll working compliance firm IR35 Shield, confirmed the underlying decision engine for the government tax collection agency’s Check Employment Status for Tax (CEST) tool has not been updated since October 2019.
This is despite the head of HMRC, Jim Harra, telling the Public Accounts Committee in March 2019 that updating the tool – which HMRC advises public and private sector organisations to use when individually assessing the employment status of the contractors they engage – is an “ongoing, unending process”.
Harra assured PAC at the time that CEST is “continually” updated “as new tribunal and court decisions are made about employment status” and to increase its “scope” so that it is properly equipped to respond to “more and more types of cases”.
Since October 2019, Computer Weekly understands there have been 20 IR35 tax tribunal hearing decisions, but HMRC’s FOI response, dated 4 March 2024, confirms the logic CEST uses to decide how contractors should be taxed has not been updated during that same period.
What is CEST?
The Check Employment Status for Tax (CEST) tool was introduced a month before the public sector reform of IR35 rules came into force in April 2017, as a means of assisting end-hirers with deciding how the contractors they engaged with should be taxed.
The reforms, which were later replicated in the private sector in April 2021, saw end-user organisations assume responsibility for determining if the contractors they engage should be taxed in the same way as off-payroll employees (outside IR35) or as salaried workers (inside IR35).
Prior to the reforms, contractors were expected to self-declare their IR35 status, but – according to HMRC – the system was misused by some contractors to artificially minimise the amount of employment tax they had to pay by misclassifying themselves as working outside IR35.
The decision to task end-user organisations with determining how contractors should be taxed placed a sizeable, additional administrative burden on them, which CEST was intended to ease.
The FOI request asked HMRC to confirm the location of the underlying programming code for CEST on GitHub, and if the “decision logic in the published version of CEST aligns with the latest logic” published in a particular file housed there.
In its response, HMRC shared a URL to a GitHub page that states: “The latest publication of the decision logic can be found here.” On clicking the link, a GitHub repository for CEST confirms no updates have been made to the tool’s underlying logic in five years.
IR35 Shield CEO Dave Chaplin said the response confirms that CEST has “remained frozen since 2019” and that its decision engine has been “collecting dust for half a decade” despite landmark cases occurring – such as the Atholl House Court of Appeal decision – that have “dismantled HMRC’s approach to IR35 status determinations”.
“The stagnation of CEST means that businesses using it to determine the IR35 status of contractors are making decisions based on outdated logic that no longer reflects the current legal landscape”
Dave Chaplin, IR35 Shield
“The stagnation of CEST means that businesses using it to determine the IR35 status of contractors are making decisions based on outdated logic that no longer reflects the current legal landscape,” added Chaplin.
When Computer Weekly initially contacted HMRC for comment on the claim that CEST’s underlying logic has not been updated for five years, a spokesperson said “the claims are wrong” and insisted the tool is “fully up to date with the latest cases”.
The spokesperson added: “We constantly test the CEST tool to ensure it reflects the employment status case law, and have done since it launched. We stand by any determination given by the CEST tool, as long as the information provided by the user is accurate.”
However, when Computer Weekly asked HMRC in a follow-up email to clarify its statement about the “claims being wrong” by confirming when the underlying logic for CEST was last updated, the spokesperson stated: “It’s true – the underlying logic hasn’t been changed for five years.”
Indeed, a document shared by HMRC as part of the FOI response confirmed as much, and stated the organisation has been “committed to [the] continuous testing of CEST against emerging employment status case law” since its launch. It then stated: “There has been no change to the logic or the outcomes [that] CEST produces.”
The HMRC spokesperson expanded on this point further and said: “Our point is that [it] doesn’t mean the tool is out of date, because we only need to update the tool when there’s a case that changes the tool’s understanding of the case law. In short, the logic hasn’t been changed, because it doesn’t need to be.”
