Usage of IR35 tool provided by HMRC in sharp decline
Usage of HMRC’s Check Employment Status for Tax (Cest) tool fell by a further 43% during the 2025-26 tax year, continuing a dramatic downward trend that has seen overall usage collapse by 71% in just two years.
A freedom of information request by off-payroll compliance specialist IR35 Shield revealed that the latest figures show total Cest usage fell from 458,894 determinations in 2023-24 to 135,178 in 2025-26, a 71% reduction. It also found that about one in five users continued to receive an indeterminate result from the tool.
According to IR35 Shield, the findings suggested that firms were continuing to abandon Cest in favour of alternative status assessment solutions and more comprehensive compliance processes.
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The firm added that the decline came amid doubts expressed by contractors, advisers and employment status experts regarding Cest’s reliability. The tool had also become outdated and no longer reflected current employment status law.
Dave Chaplin, CEO of IR35 Shield, said: “The underlying Cest logic has not been updated since November 2019 and was based on HMRC’s view of the law at that time. Despite the courts dismissing HMRC’s position in key areas … the tool has not been updated.”
He pointed to an employment status case in May involving football match officials organisation PGMOL, where the judge concluded that the engagements contained none of the hallmarks of employment. “Yet if you input the facts of that case into Cest,” said Chaplin, “the tool reaches the opposite conclusion and implies the case was finely balanced, which is plain wrong.”
Chaplin said firms were choosing better alternatives. He said: “The majority of firms we speak to for the first time are either lifting blanket bans or seeking to move away from using Cest, having realised it is not compulsory to use, nor does it give them the level of certainty they need.
“For the best protection, firms should use a full compliance service from specialists with front-line HMRC status enquiry and tribunal experience who deliver certainty whilst alleviating the administrative burden.”
Chaplin added that businesses were increasingly recognising that weak status determination processes could create significant long-term compliance problems.
He said firms did not want the risk of an HMRC compliance check dragging on for years. “They want robust assessments, comprehensive processes and confidence that an HMRC compliance check will be completed within months, rather than years.
“Cest remains misaligned with the law and does not provide the reliability firms need. The continued decline in usage reflects that.”
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Source: www.personneltoday.com