Old CEST results: Is your inside/outside IR35 determination still valid?

Many employment status determinations completed prior to the deferred April 2020 IR35 implementation deadline have been gathering dust for the past year. With the April 6th 2021 reform date now looming, it’s high time to evaluate the risks of relying on old CEST results, writes Fieldfisher tax specialist Matthew Sharp.

Confusion and concern

Following a 12-month delay to the implementation of IR35 reform due to the covid-19 crisis, changes to off-payroll tax rules are due to come into force in exactly 68 days.

Having been postponed just weeks before the 2020 launch, many businesses and contractors will be dusting off status determinations they received in the run up to last year's implementation date.

But after a turbulent year for many companies and their workforces, the return of IR35 reform (as something that needs dealing with now), has prompted confusion and concern about whether they need to repeat the CEST exercise they have already undertaken.

CEST: the small print

HMRC guidance states that:

"HMRC will stand by the result produced by [CEST] provided the information is accurate and it is used in accordance with our guidance."

However, there is very little clear information on how long a CEST determination is valid for. The guidance does state:

"Where there are subsequent material changes to contractual or working arrangements, the information originally provided may no longer be accurate and HMRC will not stand by the original outcome. HMRC would recommend that you complete CEST again to consider the new arrangements."

For a large number of businesses and contractors, the events of the past year will have necessitated changes in contractor relationships. For others, little or nothing will have changed, bar the passage of time.

But is time elapsing a 'material change' in and of itself? HMRC guidance states:

"In general, the longer the engagement the more likely that it will be a contract of service and the shorter the engagement the less likely."

While guidance recognises that time is unlikely to be determinative on the issue of status, it is clearly a consideration.

Consequently, most IR35 and status advisers recommend that CEST results are reviewed periodically (every six months, for example), and/or whenever there is any 'material changes' to working arrangements. That is, assuming such advisers recommend CEST at all!

Material changes

Time is not the only thing that is likely to have moved on since CEST determinations were carried out in the run-up to April 2020.

Many business requirements and the way workforces operate have fundamentally changed as a result of covid-19 restrictions.

Regarding the issue of 'where work is done', HMRC guidance states:

"Where a worker can carry out work wherever he wishes, the contract is more likely to be a contract for services (self-employment)."

During lockdown periods, when all workers who were able to ‘work from home’ were ordered to do so by the government, the persuasiveness of a worker being able to carry out their work ‘wherever he or she wishes’ is potentially less persuasive as an indicator of self-employment.

In an indirect nod to the circumstances created by covid-19, HMRC guidance does state:

"Working practices are becoming more and more flexible and many employees now work from home. You should not accept that a worker is self-employed just because he or she does not work at the engager’s premises."

HMRC and IR35 once coronavirus clears

Post-covid-19, HMRC is likely to pay close attention to remote working arrangements. Provision of home working equipment by an engager, for example, or allowances for such equipment, are likely to be held against contractors seeking to argue they are genuinely self-employed. 

HMRC guidance is clear that, "where the engager covers any expenses that the worker incurs as a result of working out of the office", this is likely to indicate 'employed' status.

However, for many Personal Service Companies (PSCs), the complete absence of meaningful financial support during the covid-19 crisis is likely to be a factor indicative of self-employment.

While MPs have recently pushed the government to reassess support for PSC workers, this has been an extremely difficult time for such contractors, who have fallen between the CJRS and SEISS support schemes.

On this issue, HMRC guidance states:

"A strong indication of self-employment can be the financial risk which the worker runs in doing the job. In general terms, the greater the financial risk the stronger the pointer towards self-employment."

Where contractors have received no financial support from engagers during the pandemic, and have seen their incomes hit as a result of a short working or periods without work, this clearly points towards self-employment. We regard it as a “material change” (to quote HMRC’s related guidance) that will have to be taken into consideration in any new status assessments.

CEST validity

So can engagers and workers rely on old CEST results, even if the engagement is seemingly unchanged?

In general, relying on old CEST results carries significant risk. Any engagement that has continued for over 12 months uninterrupted may, in and of itself, be a status red flag for HMRC.

Further, it seems highly unlikely that many contractor engagements will have continued without any 'material changes' – either positive or negative.

And be aware, HMRC has demonstrated in previous tribunal cases that it will seek to distinguish CEST results when it suits its purposes. Relying, then, on a CEST result that is over 12 months old may therefore expose engagers and their workers unnecessarily.

Start again?

Irrespective of the upheaval in the working environment during the pandemic, there have been very few changes to CEST since the delay to IR35 reform in March 2020 (around 40 CEST changes were made a few months prior, in November 2020).

As a result, a significant proportion of CEST results, if reassessed today, are unlikely to differ from previous determinations.

In these circumstances, where there have genuinely been no material changes to an engagement, businesses may simply want to undertake a ‘spot-check’ to ensure status assessments previously carried out still hold true.

Four fundamentals when retesting IR35 status

For other businesses, the safest course is to repeat the determination exercise. This should involve:

  1. A review of the status data previously collected. Has this changed and how?


  1. Engaging with the off-payroll workforce. Do contractors believe that there have been any material changes to their engagements?


  1. Repeating the formal assessment process. Whether the business used CEST or some other form of status assessment, the determination process should be repeated.


  1. Finally, results obtained by an engager should be confirmed again to off-payroll workers. To demonstrate the highest levels of compliance to HMRC, it is advisable to re-issue Status Determination Statements where appropriate.
Thursday 28th Jan 2021
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Written by Matthew Sharp

Matthew is a senior associate in Fieldfisher's Dispute Resolution Group, specialising in contentious tax matters. He has broad experience advising on a range of direct and indirect taxation disputes and works with all industry sectors, and both companies and private individuals. He has particular expertise advising on employment taxation issues, including IR35, and property taxation issues, including SDLT and Business Rates. 

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