Why Businesses Are Moving Away From HMRC’s CEST Tool
For several years, HMRC’s Check Employment Status for Tax tool, better known as CEST, has been the most recognisable IR35 assessment tool in the UK. Designed to help end clients, agencies and contractors decide whether an engagement sits inside or outside IR35, CEST was introduced as part of HMRC’s wider efforts to support compliance with the off-payroll working rules.
However, recent figures suggest that confidence in the tool is falling. Reports based on Freedom of Information data show a sharp decline in use, with CEST determinations reportedly dropping by 43% in the 2025/26 tax year and by 71% over two years. That’s a significant shift, particularly when medium and large businesses remain responsible for assessing the IR35 status of contractors operating through personal service companies.
So, why are organisations moving away from CEST, and what are they using instead?
What CEST Was Designed to Do
CEST was created to give users HMRC’s view on the IR35 status of an engagement. In theory, this should be helpful. A business enters information about the contract, working practices, substitution rights, control, financial risk and other relevant factors, and the tool provides an outcome.
The attraction is obvious. CEST is free, backed by HMRC and available online. HMRC has also said it will stand by a CEST result, provided the information entered is accurate and in line with its guidance.
For simple engagements, CEST can still be a useful starting point. It can help organisations think through the main status factors and create a basic audit trail. However, IR35 is rarely simple, and that is where the concerns begin.
Why Usage Is Declining
The decline in CEST usage does not mean businesses are ignoring IR35. In many cases, it suggests the opposite. Organisations are becoming more aware that IR35 status is a legal and factual assessment, not just an online questionnaire.
One criticism often levelled at CEST is that it can be too rigid. IR35 decisions depend on the reality of the working relationship, not just the written contract. Factors such as control, substitution, mutuality of obligation, integration, financial risk, independence and being in business on your own account all need to be considered in the round.
Businesses also need to demonstrate reasonable care. Under the off-payroll working rules, it is not enough to simply produce a result. The end client must take reasonable care when making a status determination and must issue a Status Determination Statement (SDS) explaining the conclusion. Where reasonable care is not taken, the tax liability can move up the supply chain.
This is one reason why a basic CEST output may not feel sufficient for many organisations, particularly where there are multiple contractors, complex project arrangements, consultancy style engagements or disagreement between the contractor, agency and end client.
The Problem with ‘Unable to Determine’
Another frustration is that CEST can produce an ‘unable to determine’ result. For a business trying to onboard contractors quickly and compliantly, an inconclusive answer creates practical problems. It does not remove the requirement to make a decision. It simply leaves the organisation needing to obtain further advice or use another process.
In a commercial environment, uncertainty can cause delay. Contractors may be reluctant to accept outside IR35 roles if they believe the assessment is wrong. Agencies may struggle to place candidates where clients cannot justify the status decision. End clients may become overly cautious and apply blanket inside IR35 decisions, which can damage access to skilled flexible labour.
A robust IR35 process should therefore do more than produce an inside/outside answer. It should help the parties understand the reasons behind the conclusion, gather evidence, manage disagreements and retain records in case HMRC opens an enquiry later.
Why Third-Party Tools Are Becoming More Attractive
This is where third-party IR35 assessment systems, such as The Contractor Compliance Portal, can provide real value.
A strong third-party system can offer a more rounded compliance process. Rather than treating IR35 as a one-off questionnaire, it can help businesses manage the full contractor compliance lifecycle. This includes assessing the role, reviewing working practices, generating documentation, issuing SDS’s, managing appeals and keeping an evidence trail.
The Contractor Compliance Portal is designed to help businesses assess and manage their IR35 supply chains in one place. It allows users to undertake role and engagement assessments, generate and issue SDS documents, manage IR35 status appeals, validate external SDSs and take out IR35 insurance for £100,000 representation cover and £100,000 IR35 tax liabilities, interest and penalties cover, for the whole supply chain, and all in the click of a single button. This is particularly useful for recruitment agencies and end clients that need consistency across multiple contractors.
For contractors, a third-party tool can also be valuable. A contractor may want a second opinion on an engagement, especially if they have been given an inside IR35 determination that does not reflect the true working practices. A documented independent assessment can help support a status disagreement or provide evidence if HMRC later asks questions.
Better Evidence, Better Decisions
One of the biggest benefits of using a specialist IR35 platform is the quality of the evidence trail. IR35 enquiries often happen long after the engagement has started, or even after it has ended. By that point, memories fade, people move on and key documents can be difficult to locate.
A proper compliance portal helps keep everything in one place. The contract, working practices assessment, SDS, appeal history, notes and supporting documents can all be stored and retrieved if needed. That matters because HMRC will not simply look at what the contract said. It will want to understand how the contractor actually worked day to day.
A good system also encourages better questions. Instead of relying on generic answers, it should help users think carefully about substitution, supervision, direction, control, deliverables, project-based work, equipment, financial risk and whether the contractor operates as an independent business.
CEST Still Has a Place, But It’s Not the Answer
CEST is not compulsory, and its declining use suggests that many businesses now want more than a basic HMRC tool.
However, relying on CEST alone can be risky where engagements are complex, high value or open to interpretation. IR35 compliance is about making a well-reasoned decision, taking reasonable care and keeping evidence to support the outcome.
For end clients, agencies and contractors, the direction of travel is clear. The market is moving towards fuller, better documented and more commercially practical IR35 compliance processes. Third-party platforms such as The Contractor Compliance Portal can support that shift by combining assessment, documentation, appeals management and insurance options in one system.
As HMRC scrutiny continues, the question is no longer whether a business has used a tool. The real question is whether it can prove it made a careful, fair and evidence-based IR35 decision. For many organisations, that is why CEST is no longer enough.
