HM Revenue and Customs (HMRC) has at last disclosed updated usage data for its online IR35 status checker tool in response to a Freedom of Information (FOI) request, after a 16-month campaign for the release of the data. The figures, obtained by ContractorCalculator CEO Dave Chaplin, reveal a 73% decrease in tool usage since the 2021-2022 financial year, with a significant decline in users over the past year.
The Check Employment Status for Tax (CEST) tool is designed to assist public and private sector organizations in evaluating the IR35 status of each contractor they engage. Users answer a series of multiple-choice questions about the contractor’s working arrangements, and the tool then determines if the contractor is inside IR35, outside IR35, or undetermined.
The original version of the tool was released just before a reform of the IR35 rules in the public sector in April 2017 and faced criticism for its inaccuracies. In November 2019, HMRC introduced an updated version of CEST in preparation for extending the IR35 reforms to the private sector in April 2020. However, the private sector roll-out was delayed until April 2021 due to the Covid-19 pandemic.
According to the FOI response, CEST usage dropped to 138,758 among contractors working via an intermediary in the 2023-2024 financial year, a 73% decrease from peak usage. The tool classified 64% of contractors as outside IR35, 17% as inside IR35, and 19% as undetermined.
ContractorCalculator’s Chaplin commented on the decline in CEST usage, attributing it to companies being more informed about IR35 and the tool’s limitations. HMRC, on the other hand, stated that the decrease in tool usage was expected as employers became familiar with the 2021 off-payroll working reforms.
The article also delves into the reasons for the drop in CEST usage, including the migration of the tool to HMRC’s Ocelot platform and delays in releasing usage data. Despite HMRC’s assurance of publicly sharing the data, the CEST usage tracker portal has not been updated since September 2021.
In conclusion, the article highlights the disconnect between HMRC’s confidence in CEST and its actual performance, as noted by Seb Maley, CEO of contractor insurance company Qdos. Maley emphasized the importance of understanding how CEST is used and its implications for contractors’ tax obligations.
