The HMRC CEST Tool Usage Decline has become one of the most significant developments in the UK’s IR35 compliance landscape.
Newly released Freedom of Information (FOI) data shows that usage of HMRC’s Check Employment Status for Tax (CEST) tool has fallen by 71% in just two years, dropping from 458,894 determinations in 2023/24 to 135,178 in 2025/26.
This sharp decline raises important questions about employer confidence, employment status assessments, and the future of IR35 compliance.
Key findings:
- CEST usage declined by 71% between 2023/24 and 2025/26.
- Usage fell by a further 43% during the 2025/26 tax year alone.
- Around one in five users still receive an indeterminate result.
- Businesses are increasingly adopting alternative IR35 assessment solutions.
- Concerns continue regarding CEST’s alignment with recent employment status case law.
As organisations seek greater certainty around off-payroll working rules, the reasons behind this decline deserve closer examination.
What Is the HMRC CEST Tool and Why Was It Created?
The Check Employment Status for Tax (CEST) tool was introduced by HMRC to help organisations determine whether a worker should be treated as employed or self-employed for tax purposes. The online assessment tool asks users a series of questions about contractual arrangements and working practices before generating an IR35 status determination.
The importance of CEST increased significantly after the off-payroll working reforms were introduced in the public sector in 2017 and later extended to medium and large private-sector organisations in April 2021.
These reforms shifted responsibility for determining employment status from contractors to hiring organisations.
Purpose of the HMRC CEST Tool:
| Purpose | Description |
| Employment Status Assessment | Determines whether a worker falls inside or outside IR35 |
| Tax Compliance Support | Helps organisations meet off-payroll working obligations |
| Risk Reduction | Assists businesses in documenting status decisions |
| HMRC Guidance | Provides a standardised assessment process |
The tool was designed to simplify complex employment status decisions, but recent trends suggest that many organisations are reassessing its value.
Why Has HMRC CEST Tool Usage Declined by 71% in Just Two Years?
The latest FOI data obtained by IR35 Shield paints a clear picture. Total CEST determinations have fallen dramatically, indicating that businesses are actively moving away from the tool rather than simply using it less frequently.
HMRC CEST Usage Decline:
| Tax Year | Determinations |
| 2023/24 | 458,894 |
| 2025/26 | 135,178 |
| Overall Change | -71% |
The decline has attracted widespread attention because it occurred despite no major legislative changes affecting IR35 during the same period.
A senior IR35 compliance specialist observed:
“The scale of the decline suggests organisations are making deliberate decisions to adopt more comprehensive assessment processes rather than relying solely on a single online tool.”
Many businesses now appear to be prioritising stronger compliance frameworks, particularly as HMRC enquiries can become lengthy and resource-intensive.
The figures also suggest that familiarity with off-payroll rules alone cannot fully explain the reduction. Instead, the trend points towards changing attitudes regarding employment status assessments.
What Does the Latest CEST Data Reveal About User Confidence and Determination Outcomes?
Beyond the decline in overall usage, the latest CEST data provides insight into how businesses view the tool’s effectiveness. The figures suggest that falling adoption is not only due to greater familiarity with IR35 rules but also ongoing concerns about the quality, consistency and reliability of status determinations.
Many users still receive inconclusive outcomes, while changes in determination patterns have raised further discussion among compliance professionals. These trends help explain why organisations are reviewing their IR35 assessment processes and considering alternative compliance solutions.
Why Are Indeterminate Results Still a Major Concern for Businesses?
One of the most frequently cited criticisms of CEST is its inability to provide a clear answer in every case. According to HMRC data, approximately one in five intermediary users continue to receive indeterminate outcomes.
For businesses, this creates a significant challenge. An inconclusive result leaves organisations responsible for making further assessments while still carrying the risk of future HMRC scrutiny.
Key concerns include:
- Uncertainty during contractor onboarding.
- Additional administrative workload.
- Increased compliance costs.
- Potential exposure to tax liabilities.
These issues can undermine confidence in a tool designed to provide clarity.
How Have CEST Determination Patterns Changed Over Time?
Another interesting trend is the changing distribution of outcomes generated by the tool.
Changes in CEST Outcomes:
| Outcome Trend | Observation |
| Outside IR35 Decisions | Increased from approximately 50% to 64% |
| Indeterminate Results | Remain significant across assessments |
| Overall Usage | Continues to decline annually |
The growing proportion of outside IR35 determinations has raised questions among some compliance experts, particularly because the underlying logic of the tool has reportedly remained unchanged since 2019.
These developments suggest that organisations are increasingly looking beyond simple automated determinations when assessing contractor engagements.
Why Are Businesses and IR35 Specialists Moving Away from the CEST Tool?
The migration away from CEST appears to be driven by a combination of practical, legal and compliance-related concerns.
Many advisers argue that employment status decisions require detailed analysis of working practices, contractual terms and evolving case law. A standardised questionnaire may not always capture these complexities.
Areas influencing the shift include:
- Growing demand for greater certainty during HMRC compliance checks.
- Increased use of specialist IR35 assessment providers.
- Concerns regarding the reliability of automated outcomes.
- The need for detailed audit trails and documented reasoning.
- A desire to demonstrate reasonable care obligations.
Industry experts increasingly recommend combining status assessments with broader compliance procedures rather than relying solely on a single determination tool.
How Have Employment Status Cases and Legal Developments Influenced the Decline?
A key factor behind the HMRC CEST Tool Usage Decline is concern over whether the tool reflects current employment status case law. As tribunal decisions continue to shape tests such as control, substitution and mutuality of obligation, businesses increasingly expect assessment tools to align with modern legal principles.
Critics argue that CEST has not kept pace with recent developments, leading some organisations to question its reliability for important IR35 decisions.
What Did the PGMOL Employment Status Case Reveal?
The Professional Game Match Officials Limited (PGMOL) case became a major employment status ruling in 2026. The tribunal found that football referees engaged by PGMOL were not employees for tax purposes after reviewing their working arrangements.
The ruling highlighted:
- The importance of actual working practices.
- The role of control in employment status.
- The significance of mutuality of obligation.
- The need to assess each engagement individually.
The case gained attention because some experts suggested CEST could produce a different or indeterminate outcome in similar circumstances, raising questions about the tool’s consistency with tribunal decisions.
Why Do Critics Say CEST No Longer Reflects Current Case Law?
A common criticism is that CEST’s core logic has remained largely unchanged since 2019, despite several important employment status rulings since then. Many compliance specialists argue that assessment methods should evolve as courts refine how key employment status tests are applied.
Key Employment Status Factors:
| Employment Status Test | Why It Matters |
| Control | Measures supervision and direction over the worker |
| Substitution | Assesses the right to provide a substitute |
| Mutuality of Obligation | Reviews obligations to offer and accept work |
| Financial Risk | Considers commercial risk borne by the worker |
| Business-on-Own-Account | Determines whether the worker operates independently |
HMRC maintains that the tool remains rigorously tested against case law and continues to stand by outcomes where information has been entered accurately. However, debate surrounding its methodology remains ongoing.
What Are the Compliance Risks of Relying Solely on CEST for IR35 Determinations?
The decline in usage does not reduce the importance of IR35 compliance. In fact, organisations remain fully responsible for making accurate employment status decisions under off-payroll working rules.
A robust compliance process generally extends beyond the completion of a questionnaire.
Businesses must consider:
- Actual working practices.
- Contract reviews.
- Status Determination Statements (SDS).
- Evidence gathering.
- Ongoing engagement monitoring.
- Internal governance procedures.
A tax compliance consultant noted:
“The strongest IR35 compliance programmes combine status assessments with documented evidence, governance controls and regular reviews of contractor arrangements.”
Failure to demonstrate reasonable care can increase exposure to tax liabilities, penalties and lengthy HMRC investigations. Consequently, many organisations now view status determination as part of a wider compliance strategy rather than a standalone exercise.
What Does the Future Hold for HMRC’s CEST Tool and IR35 Compliance in the UK?
The future of HMRC’s CEST tool remains uncertain as usage continues to decline. While HMRC still supports the tool, many organisations are increasingly turning to more comprehensive assessment methods that provide stronger evidence and greater confidence in IR35 determinations.
As employment status case law evolves, businesses are placing greater emphasis on accurate, well-documented and legally defensible decisions. The 71% drop in CEST usage over the past two years highlights a broader shift towards more robust compliance frameworks.
To reduce risk and meet regulatory expectations, organisations engaging contractors should regularly review their IR35 processes and ensure their status assessments remain aligned with current legislation and best practices.
Conclusion
The HMRC CEST Tool Usage Decline highlights a significant shift in how UK organisations approach IR35 compliance. With usage falling by 71% in just two years, many businesses are seeking more comprehensive assessment methods that provide greater certainty and stronger compliance protection.
While HMRC continues to support CEST, concerns around indeterminate results, evolving case law and assessment reliability are driving organisations towards broader, evidence-based status determination processes.
Frequently Asked Questions
Is the HMRC CEST tool mandatory for making IR35 determinations?
No. Businesses are not legally required to use CEST. They may use alternative assessment methods provided they take reasonable care when determining employment status.
Can HMRC challenge an employment status decision made using CEST?
HMRC generally stands by CEST outcomes when accurate information has been entered and the working arrangements match the details provided.
What factors are most important when assessing IR35 status?
Control, substitution rights, mutuality of obligation, financial risk and actual working practices are among the most important considerations.
How does a Status Determination Statement fit into the IR35 process?
An SDS documents the organisation’s IR35 decision and the reasons supporting that determination, helping demonstrate compliance.
Are small businesses required to follow the off-payroll working rules?
The private-sector off-payroll rules generally apply to medium and large organisations. Different rules may apply to small businesses.
What records should organisations keep to support IR35 decisions?
Businesses should retain contracts, assessment reports, SDS documents, correspondence and evidence of actual working practices.
What alternatives are available if a business chooses not to use CEST?
Many organisations use specialist IR35 assessment providers, independent reviews, legal advisers and comprehensive compliance platforms to support status determinations.