With HMRC winning 11 IR35 cases, versus just six for the taxpayer, it’s time for a reality check, including on CEST

As the result of a recent Freedom of Information request, HMRC revealed that they haven’t changed the logic for CEST since 2019. Online, one resulting headline was that CEST has not been updated for five years and is “misaligned with the law.”

So, writes tax lawyer Rebecca Seeley Harris, founder of ReLegal Consulting, what is the reality for HMRC’s much-maligned CEST tool, and employment status principles generally?

New IR35 cases update

In February 2024, HMRC published a briefing stating that they had recently tested the tool against 14 of the newest cases under IR35. Remember these are all historic IR35 cases not under the Off-Payroll Working (OPW) rules.

HMRC stated that: “We have conducted a thorough review to ensure consistency of outputs with the existing CEST service - this included re-testing cases. There has been no change to the logic or the outcomes which CEST produces.”

Of the 14 cases, nine show that IR35 applies i.e. that HMRC won. So, HMRC won eight of the cases in this list, (excluding Atholl House in the Court of Appeal as the court did not decide on IR35 status but, remitted it).

Taxman 11 -- Taxpayer 6

If you bring the list up to today’s date, however, you could add that HMRC lost Atholl House in the remitted FTT but, won the case of PD&MJ Ltd (Phil Thompson), also at the FTT. So currently, HMRC have won nine; in fact, if you add that the PAYA case was actually three cases in one, they have won 11 cases. Whereas the contractor has won just six IR35 cases.

The vast majority of these cases don’t get further than the First-Tier Tax tribunal and these cases do not set a precedent (I will elaborate on that later). Of those cases, only four were in the Upper Tribunal and HMRC won three of them, and then two cases went on to the Court of Appeal and HMRC won Kickabout Productions while the other, Atholl House, was referred back to the FTT.


The First-Tier Tax Tribunal (FTT) is a fact-finding tribunal and as such the judgments do not set a legally binding precedent. If there is an appeal from the FTT, it will go to the Upper Tribunal on the basis that the FTT erred in law. You cannot appeal the facts.

Is HMRC winning?

So, if you excluded the FTT cases then you would be looking at the four cases that went to the UT; three of which were won by HMRC and a fourth case in the Court of Appeal which was again won by HMRC.

There is no denying that the majority of cases are won by HMRC based on the judge preferring their argument when it comes to employment status and IR35. So, why would they change CEST logic when they are winning?

For the naysayers who think that the CEST logic should have been changed, I would be interested in finding out what these changes would have been. These changes would have to be established case law from a legally binding precedent, otherwise it is dangerous using them as a point of argument.

There would be little point in changing the logic of the tool for FTT cases which make up the majority because they are based on fact not law. Of the three cases in the Upper Tribunal, being Christa Ackroyd Media Ltd, Northern Light Solutions Ltd and Red, White and Green Ltd (the Eamonn Holmes case), all appeals were won by HMRC.

There are currently three further IR35 appeals awaiting judgment from the Upper Tax Tribunal. Those cases are RALC Consulting Ltd where HMRC has appealed, McCann Media Ltd where Neil McCann has appealed, Basic Broadcasting Ltd (the Adrian Chiles case) which HMRC has appealed.


There is also the all-important case of Professional Game Match Officials Ltd (PGMOL) in the Supreme Court which PGMOL appealed because HMRC won in the Court of Appeal. This case has focused on mutuality of obligations and the framework of control. If PGMOL wins the case, there is a possibility that HMRC will have to change CEST’s logic based on the outcome of the judges’ decision on mutuality of obligations.

So far, however, the courts are leaning more towards the view that mutuality of obligations is akin to basic contract law, that there are mutual obligations were work is offered and provided for payment. However, that does not mean that there is necessarily a contract of employment. In the Court of Appeal in HMRC v. Atholl House at paragraph 168:

“Mutuality of obligation and a right of control are necessary, but not sufficient, conditions for a contract of employment, and if those conditions are satisfied it is necessary to go on to consider a range of other factors.”

So, it will depend on the outcome of these cases, especially PGMOL, as to whether the logic needs to change.

CEST? It’s right that it’s free

My interest in this subject is not necessarily in defence of CEST or HMRC and it pains me to point out that HMRC are winning but, I don’t make the law!

I do, however, think that businesses and contractors should have a balanced view on whether it is safe to use the free tools that the government provides. Businesses should not have to pay for a tool if they don’t want to and they are entitled to understand the reality of the situation.

HMRC’s new Help to Comply guidance manual is another free tool from the government which can aid with IR35 compliance.

Released on Novemner 30th 2023, the manual (‘GfC4’), is a very comprehensive set of guidelines for what HMRC’s expectations are for compliance with OPW. For the contractor, it will give you an understanding of how companies are required to comply. For those contractors who are working under the ‘small company’ IR35 regime, you can use CEST for either the initial assessment or for the Status Disagreement process.


I have hopefully provided an in-depth picture of how employment status case law and logic works. You shouldn’t have to pay for an IR35 testing tool to ensure your compliance and you don’t need to use CEST or any other tool for that matter. I don’t believe any of the tools will constitute ‘reasonable care’ if used in isolation.

What I find most disturbing about IR35 and OPW, having spent nearly 25 years advising on it, is that it is not a level playing field. There is no doubt in my mind that it is a badly drafted piece of legislation but, a bit like CEST, that is for the government to change.

Profile picture for user Rebecca Seeley Harris

Written by Rebecca Seeley Harris

Rebecca is a leading expert in employment status, IR35 and the law involving independent contractors and the self-employed for the purposes of tax and employment law. Rebecca has run her own consultancy for the past 20 years covering all employment status issues such as off-payroll in the private and public sector, otherwise known as IR35, s.44 and any issues affecting the self-employed and personal service companies.
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