HMRC unveiled its updated CEST tool at 14:00 on 30 April 2025, as promised. Despite HMRC forewarning users that the aim of the update was to make it easier for users to navigate the tool, there was still anticipation in the tax industry that there would be a major overhaul in light of recent tax law cases. Sadly, the changes many had wanted to see have not been incorporated into the updated tool.
Below we provide a brief summary of changes and our recommendations on how CEST should be used.
CEST Background
CEST was introduced in 2017 to assist engagers and workers (including those who work via intermediaries such as their own Personal Service Company [‘PSC’]) with the aim of helping engagers and workers determine the employment status of the engagement contract for tax purposes. Following consultations, an updated version was released on 25 November 2019.
So what are the CEST changes?
- There are up to six sections to complete. Based on the users answers, they may not need to complete all sections, and the number of questions may vary.
- Users of the tool can check and amend their answers after each section has been completed.
- New questions regarding mutuality of obligation, control, and integration have been included.
- New links to HMRC guidance have been provided.
- Updated guidance concerning what comprises personal service and financial risk have been provided.
- A CEST logic spreadsheet is provided.
What has not changed?
- Unfortunately, the underlying principles used by CEST to determine employment status have not changed.
- HMRC has confirmed that any CEST determinations pre-update will be honoured providing the correct information has been used in line with HMRC’s guidance and the role of the worker has not changed.
Whilst the changes will help engagers and workers review the employment status position the changes made will not provide a definitive answer in all cases. Consequently, it is recommended that any borderline or undetermined cases are reviewed in more detail.
Lessons to be learnt
Any guidance which enables users to answer the questions correctly is welcome. However, due to the underlying principles used to create the tool remaining unchanged, plus the complexity in determining employment status, it is recommended that the CEST tool is used as a starting point. Engagers should always have robust policies and procedures in place, especially where off-payroll workers are engaged on a regular basis. It should be remembered that CEST gives HMRC’s view of employment status which may not necessarily align with established and evolving tax case law.
Contact
Please contact the Employment Tax team should you have any questions or require assistance with employment status.
