The new version of CEST, informally dubbed “CEST 2.0” is now live and available for use in IR35 determinations. If you’re contracting through your own Limited company it’s possible that your client may be using it, so in this article we’ll look at what contractors need to know about this update.
What is CEST?
Check Employment Status for Tax, or CEST, is the Government’s free online IR35 assessment tool. It’s had several updates since it’s launch in April 2017, and despite widespread criticism of its reliability and results many end clients still rely on it when completing IR35 determinations.
HMRC’s own statistics state that CEST was used 1.8 million times between November 2019 and November 2021, so it’s clearly an important resource for end clients and contractors, regardless of the criticism.
What’s changed with the new version?
This update is only phase one, and most commentators are more interested in the next phase, where the logic and questions may be updated. For now, though, there are some updates that contractors and clients will need to be aware of.
HMRC’s Employment Status Manual
The ESM is now embedded in the tool, meaning there’s no need to have separate information open while completing an assessment. The user is automatically directed to the relevant guidance for a particular question. There’s also less chance of being timed out while you checking a detail.
Review as you go along
The user can now review their answers at the end of each section, rather than just at the end. This makes it possible for users to reflect on their answers and access guidance where necessary at earlier stages. This should help users to provide accurate answers and reduce the incidence of “unable to determine” as an outcome.
Inside/outside explainer for each section
The output now gives the inside/outside conclusion CEST has reached for each section, which will help users to understand why it has returned a particular result.
What are we expecting for phase two?
As yet, the logic and questions that CEST uses have not been updated, and we expect updates in phase 2. One possible reason for this is that the Supreme Court decision on the PGMOL case is expected soon. If this decision goes against HMRC, they may need to update CEST’s logic to take account of Mutuality of Obligation, which the tool largely ignores at the moment.
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