The responsibility for determining the employment status will fall on the business if it is a medium or large-sized entity and on the contractor if the business is small. The CEST tool helps with this determination by asking a series of questions about the contract, the worker and the work performed and returning one of the following responses:

• self-employed for tax purposes for this work;
• employed for tax purposes for this work;
• unable to make a determination (for employed or self-employed for tax purposes);
• off-payroll working rules (IR35) do not apply;
• off-payroll working rules (IR35) apply; and
• unable to make a determination (for whether the off-payroll working rules apply).

The changes have been designed to simplify the language and make the tool easier to use. Updates to the questions themselves are relatively minor cosmetic tweaks, however the accompanying guidance has been revised to reflect recent case law. Links to the guidance have also been added within the questions making it easier for the user to find the relevant information.

Although HMRC says it will honour the outcome of the CEST tool, subject to the user answering the questions correctly and not omitting information, its use is not mandatory in determining employment status. We recommend reviewing the guidance closely in all cases, not just where the tool returns an inconclusive result.

If you are a contractor or your business regularly engages workers on a freelance basis, we can help you determine the employment status of each engagement for tax purposes.