New official CEST usage data is serving to leave the reputation of the HMRC tool in tatters – while also asking some questions of its own to other, industry-built online IR35 tests

Released by the tax office on Thursday, the data show that out of 1,018,250 uses between November 2019 and May 2021, CEST produced 210,000 ‘unable to determine’ results.

That represents an indecisive rate of 21% — embarrassing for HMRC given it is already under fire for what it has been claiming is CEST’s actual undetermined rate — a lesser 15%.


‘CEST’s undetermined rate is too high’

Rebecca Seeley Harris, a status expert, says that although CEST also produced 499,974 ‘outside’ results (49% share), and 308,176 ‘inside’ results (30% share) over the same period, one in five contractors being left undetermined is unacceptable.

“[Such an undetermined rate is] too high,” she said. “HMRC needs to work on getting that figure down.”

Chris Mattingly, an IR35 adviser, has been keeping a close eye on when CEST can’t decide, because rather than the 15% which HMRC claims, he says the tool was already up to 19%.


‘Not fit for purpose’

“That was since the last set of figures released in March [so] the number of indeterminate results is increasing,” he told ContractorUK. “Quite simply, CEST is not fit for purpose.”

Seb Maley, an IR35 contract reviewer agrees, saying “it’s astonishing that the government still stands by an IR35 tool that hasn’t been able to make up its mind” over 200,000 times.

“Here we have proof that CEST has left hundreds of thousands of contractors and businesses in limbo, unsure of whether a contract belongs inside or outside IR35.”

He continued: “As far as I’m concerned, this should be the final nail in the coffin for HMRC’s fundamentally flawed tool.”


‘Using CEST to get the result they want’

Kate Cottrell, a status specialist, believes heavily scrutinising HMRC’s new CEST figures is ill-advised, because they paint an incomplete picture.

People using CEST over and over again until they get the result they want is very much ‘a thing’ but there’s no allowance for that in these figures,” she said, adding:

“So the data is largely meaningless unless HMRC publish more about usage, or at least research usage properly. That said, how can HMRC justify all those undetermined results?”


‘Clients are asking for help on undetermined contractors’

The answer, at least for contractors wondering how to avoid an indecisive CEST result, is often about understanding and evidence, according to ReLegal Consulting.

Run by tax lawyer Ms Seeley Harris, the advisory said: “Increasingly…clients are coming to us to help determine the undetermined assessments.

“Very often though, I find that it has been because one of the CEST questions has not been understood or on other occasions, it’s because insufficient evidence has been provided and it requires an in-depth conversation to find out the true position.”

The chief executive of IR35 Navigator, Mr Mattingly, believes that independent expert advice – from a human being – is indeed the best bet.


‘IR35 tools aren’t reliable’

“Algorithm-based IR35 assessment tools cannot be relied upon,” he says. “To provide an accurate IR35 status assessment, you need to understand not only the contract, but the facts surrounding the working practices of the engagement.

“Only when combined with an understanding of case law can a definitive status determination be reached.”

Qdos, where Mr Maley is CEO echoed: “[CEST’s] lightweight nature means decisions it does make should be checked by an expert.”

“This staggering number of undetermined results leads to confusion, delay and in many cases, non-compliance.”



Backing the call for more information from HMRC to accompany the data, the firm says it would like to know what happened to the 210,00 engagements given no determination.

“Have HMRC got the resource or expertise to offer support on this scale?” Mr Maley asked, perhaps alluding to the just 2,251 calls to HMRC’s Employment Helpline, made between September and November 2019 (which was the highest volume of calls disclosed). “I very much doubt it.”

Formerly of the tax office Kate Cottrell, now of Bauer & Cottrell reflected: “The only way HMRC can justify all these undetermined results is to drill down into how they came about. Are users being realistic? Did HMRC get calls for assistance from the 200,000-plus stranded individuals? I suspect not.”


‘Input whatever you like, to get a meaningless result’

Similarly concerned about realistic inputs is WTT Legal’s Leila Ghazzali, who was advising about constructing a hypothetical contract in light of the Robert Lee IR35 case, although her analysis applies to CEST, too.

“Therefore you can input whatever you like”, she said. “and make a determination on that basis, but if it is not reflective of the actual working practices, then any determination will mean very little.”


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