Consultants Guide to IR35 Cest Tool

The Check Employment Status for Tax or CEST tool as it is more commonly referred to, is an online tool introduced by HM Revenue and Customs (HMRC) in order to assist in determining a contractor’s tax status i.e. if the contract is inside or outside IR35. Here we breakdown exactly how the CEST tool works and why so many fee payers and end clients are referring to this tool. Let’s start with the following. . .

Who determines the contracts IR35 status?

As of April 2020, contractors, freelancers and consultants working through their own limited company will have the contracts IR35 status determined by the fee payer i.e. the end client or recruiter. This applies to both the public and private sector.

IR35 was introduced to ensure that the working practices of that individual and their contract are that of a legitimate limited company. By introducing IR35 – in the eyes of HMRC – it ensured that the correct tax and NI was being deducted fairly for those working through legitimate working practices. For more information on IR35, see our easy to read Guide to IR35.

When was the CEST tool introduced?

Introduced in 2017 to support the public sector IR35 roll out, an updated version was released in November 2019 to support the private sector payroll changes.

How does the CEST tool work?

The CEST tool is quite simply a digital aid to help assist in determining the contracts status. It offers a series of questions that need to be answered for it to provide its ‘recommended’ result.

Once completed, results state either:

• Do apply (Inside IR35)
• Do not apply (Outside IR35)
• Undecided (HMRC may state you you are inside IR35 if  the result is ‘undecided’. However, this does not mean you should contract inside based on this. It simply means in the eyes of this tool, the questions you have answered does not provide you with a clear result. Always seek advice and further information if this is the case)

will then state: Inside, outside or undecided – if the app provides the result of ‘undecided’ we recommend speaking to an accountant or the fee payer for further advice.

Please note, this is an app and will not allow open comments/statements to be included. This is where many find a fault in this app as it adds restrictions to the information being provided, not giving a true reflection of the overall contract and working practices.

Will HMRC be bound by IR35 CEST tool results?  

HMRC have stated they will stand by the results provided on the CEST app, however there is no legally binding claim that when challenged the CEST tool has any weight behind the result. HMRC would still have the right to challenge any contractor regardless of what the CEST tool says.

Will I get confirmation of my IR35 result on CEST?

There will be no permanent log or record of your results, so always ensure to download or print a copy of the results if you plan to reference this.

There are several tools out there, which one do I use? Or should my fee payer/end client/recruiter use?  

CEST, ESS, IR35 Shield, Compliance Management Systems… these are just some of the IR35 tool checkers found online. Any of these online tools can be used, and some require greater detail than others, however there really is no one size fits all. Our insurance partners Kingsbridge are experts in this field and offer Integro clients an exclusive offer of a FREE IR35 review, click the button below to find out more.