Is HMRC’s revised CEST any better?

HMRC recently revised its Check Employment Status for Tax (CEST) digital tool with effect from 30 April 2025, which HMRC, rather optimistically, hopes will make it easier for using the CEST tool, including simplifying the language.  The relevant Employment Status Manual (ESM) published by HMRC has also been updated to reflect the new updates.  

So, what’s new?

HMRC has stated that the updates aim to provide a more user-friendly experience and generate more definitive outcomes.  The key changes include:

• The questions have been amended to be more precise and easier to understand, potentially reducing ambiguity in responses.
• The tool now supposedly more explicitly addresses mutuality of obligations (MOO), which is a fundamental aspect of employment status.
• HMRC claims the tool now offers clearer explanations and guidance to help users navigate the questions and understand the results.

While these updates are a step forward, several key concerns still remain.  The fundamental algorithm and the weight given to various factors, such as control, personal service, and MOO, are still largely difficult to understand and the tool still fails to address complex scenarios or the day-to-day practical arrangements between the parties.  This lack of transparency makes it difficult to understand why a particular determination is reached and whether the weighting actually reflects current case law.  This is reflected in the ESM guidance which outlines that there is no change to the underlying technical principles.

The concept of ‘control’ remains a complex area, and arguably the tool may still oversimplify its nuances.  Subtle differences in how control is exercised in practice can significantly impact employment status, but this might not be adequately captured by the updated tool.  While HMRC states MOO is now better addressed, its inclusion and interpretation within the CEST tool is still not up to scratch.  Case law often highlights the complexities of MOO, as it was recently addressed in the recent Supreme Court case of PGMOL v HMRC, and whether the CEST tool fully captures these nuances remains questionable.  Many of our readers know the tool’s predecessor came under significant criticism as the tool was misaligned with established case law.  To date, the tool still doesn’t fully account for the intricacies of various cases in this area. 

Can the CEST tool results be relied upon?

Despite the updates, we would advise our clients to proceed with caution!  Essentially, and importantly, the CEST tool’s output is HMRC interpretation of case law, and it in itself is not legally binding.  Further to this, the accuracy of the CEST determination provided by HMRC hinges on the accuracy of the information that is provided.  However, HMRC has outlined in its Spring tax update that it is committed to standing behind the outcomes of this tool where it has been ‘used correctly’. 

From our experience, this is not as straight forward as it sounds when it comes to an HMRC enquiry.  HMRC’s reconciliation of discrepancies between the CEST tool outcomes and HMRC’s internal investigations reveals crucial insights for taxpayers.

Firstly, while HMRC commits to honouring CEST results, this is contingent on the accuracy and consistency of user-inputted information with their own factual enquiries. HMRC’s differing interpretations of facts and CEST questions, between taxpayers and themselves, undermines the reliability of CEST results for taxpayers. 

Secondly, HMRC’s justification for discrepancies based on their own interpretation of facts appears contradictory, given their acknowledgement of previously losing cases due to their own misinterpretation of facts, compared to the Tribunal’s interpretations.  This highlights the fundamental subjectivity and potential unreliability of depending solely on the CEST tool, particularly when HMRC’s own interpretation of the same facts can differ significantly.

Disclaimer:  Chartergate Legal Services Ltd has drafted this update to provide you with a general overview of the relevant law and developments at the date of publication only.  This update is provided as a general overview and should be taken as such.  It is not a substitute for professional advice that is specific to your circumstances and should not be relied upon as such.