HM Revenue & Customs (HMRC) has sought to dismiss concerns about its online IR35 status checker tool not being updated for five years by emphasising how “rigorously tested” the much-maligned tool is.
A Freedom of Information (FOI) request, lodged with HMRC by off-payroll working compliance firm IR35 Shield, confirmed the underlying decision engine for the government tax collection agency’s Check Employment Status for Tax (CEST) tool has not been updated since October 2019.
This is despite the head of HMRC, Jim Harra, telling the Public Accounts Committee in March 2019 that updating the tool – which HMRC advises public and private sector organisations to use when individually assessing the employment status of the contractors they engage – is an “ongoing, unending process”.
Harra assured PAC at the time that CEST is “continually” updated “as new tribunal and court decisions are made about employment status” and to increase its “scope” so that it is properly equipped to respond to “more and more types of cases”.
Since October 2019, Computer Weekly understands there have been 20 IR35 tax tribunal hearing decisions, but HMRC’s FOI response, dated 4 March 2024, confirms the logic CEST uses to decide how contractors should be taxed has not been updated during that same period.
The FOI request asked HMRC to confirm the location of the underlying programming code for CEST on GitHub, and if the “decision logic in the published version of CEST aligns with the latest logic” published in a particular file housed there.
In its response, HMRC shared a URL to a GitHub page that states: “The latest publication of the decision logic can be found here.” On clicking the link, a GitHub repository for CEST confirms no updates have been made to the tool’s underlying logic in five years.
“The logic has not changed from the data already held in the public domain, nor has the logic changed since CEST moved to its new guidance platform,” said HMRC in its FOI response. “As and when we make updates to the logic, those changes will be communicated publicly.”
IR35 Shield CEO Dave Chaplin said the response confirms that CEST has “remained frozen since 2019” and that its decision engine has been “collecting dust for half a decade” despite landmark cases occurring – such as the Atholl House Court of Appeal decision – that have “dismantled HMRC’s approach to IR35 status determinations”.
For this reason, he said, public and private sector organisations should be wary of relying on CEST’s results.
“The stagnation of CEST means that businesses using it to determine the IR35 status of contractors are making decisions based on outdated logic that no longer reflects the current legal landscape” Dave Chaplin, IR35 Shield
“The stagnation of CEST means that businesses using it to determine the IR35 status of contractors are making decisions based on outdated logic that no longer reflects the current legal landscape,” added Chaplin.
When Computer Weekly initially contacted HMRC for comment on the claim that CEST’s underlying logic has not been updated for five years, a spokesperson said “the claims are wrong” and insisted the tool is “fully up to date with the latest cases”.
The spokesperson added: “We constantly test the CEST tool to ensure it reflects the employment status case law, and have done since it launched. We stand by any determination given by the CEST tool, as long as the information provided by the user is accurate.”
However, when Computer Weekly asked HMRC in a follow-up email to clarify its statement about the “claims being wrong” by confirming when the underlying logic for CEST was last updated, the spokesperson stated: “It’s true – the underlying logic hasn’t been changed for five years.”
Indeed, a document shared by HMRC as part of the FOI response confirmed as much, and stated the organisation has been “committed to [the] continuous testing of CEST against emerging employment status case law” since its launch. It then stated: “There has been no change to the logic or the outcomes [that] CEST produces.”
The HMRC spokesperson expanded on this point further and said: “Our point is that [it] doesn’t mean the tool is out of date, because we only need to update the tool when there’s a case that changes the tool’s understanding of the case law. In short, the logic hasn’t been changed, because it doesn’t need to be.”