A few weeks back HMRC released the new version of the CEST tool. If the general commentary on the tool is to be believed, the tool is still deficient (of things such as mutuality of obligations) and there are still inconsistencies between how this tool determines results and previous tribunal decisions.

We have tested the tool extensively and are surprised with the general sentiment of apathy. In this series we look at the following

Why does any HMRC development draw bad press?

The IR35 protection industry is massive. The fear of being found liable for several tens thousands of pounds has led contractors in droves to buy insurance products, third party testing and review services. The market commentary on IR35 is dominated by this industry. Any helpful clarity from HMRC or an attempt to make the determination objective threatens its existence. Therefore, whilst it is useful to listen to their views, its foolhardy to take this as gospel. By way of example, one company is reporting record sales of their products and services, and reducing their urgent turnaround IR35 reviews because of unprecendented demand.

Our first impression of the CEST tool

The logic of the tool is not very difficult to determine. It places the office-bearer test at the highest level – and if you are engaging contractors on an office bearer basis, they are automatically inside. If not, the tool asks you the next question on substitution. Previously, the substitution questions were also equally decisive, in that if you answered them in an IR35 friendly manner you get an outside IR35 determination. Now it is not possible to avoid the other questions in the tool. This is helpful as the tool is capturing more information about your assignment and giving a holistic determination.

The approach is consistent with case law and guidance by tribunal judges. We noticed that it is possible to navigate back from the determination page to the review answers page. There, you are able to edit individual responses and see what difference your changes would make to the determination. Hence the logic is workable. Overall, the tool still regards substitution as the key test for outside IR35 determination.

The guidance

We found the guidance provided in the note just below each question very helpful. It is much more reflective to actual working practices. We consider it is positive that HMRC is bridging the gap between its understanding of the working practices and the actual working practices. We understand that there will be further guidance added on by way of backlinks to other information on HMRC website in due course.


We were impressed and also optimistic that organisations that have already declared their hand out (prematurely, in our view) will reconsider their decision. We believe it is possible for organisations to tweak their internal processes ever so slightly, in order to be complying with the spirit of the legislation. After all, is that too much of a burden if it gives your organisation access to a highly skilled and experienced external talent pool.