A Freedom of Information (FOI) request by IR35 tax compliance firm IR35 Shield has revealed a dramatic 73% decline in the use of HMRC’s Check Employment Status for Tax (CEST) tool since 2021-22, the first year the reforms were rolled out to the private sector.
Usage continued to drop year on year, with the most recent tax year (2024-25) witnessing a 50% drop year-on-year compared to 2023-24.
The sharp falls raise questions about the reliability, trustworthiness, and relevance of the government-backed tool used to determine IR35 tax status.
The CEST tool, developed and promoted by HMRC, was intended to simplify the process of determining whether workers should be classified as employed or self-employed for tax purposes under IR35 legislation and also for sole traders.
However, from the outset, it has attracted criticism for its perceived bias, lack of legal standing, and failure to provide determinations in a significant number of cases.
Dave Chaplin, CEO of IR35 Shield, has called the decrease unsurprising, he said, “This data confirms what many in the contracting sector have long suspected.
“Confidence and use of HMRC’s CEST tool have fallen. Whilst market factors play their part, we’ve seen no evidence of a collapse in contractor demand that would explain a 73% drop in usage. What’s more likely, and what we are seeing on the ground, is that companies are more informed about IR35 and the flaws in HMRC’s tool and are not using it because it doesn’t deliver the certainty they need.
“Whilst some drop off would be expected in the few months after the reforms went live, one would expect annualised usage to flatline shortly after. Instead, there has been a consistent year-on-year decrease in usage, and a 50% drop off in the last year alone – four years after the reforms were introduced.
“Tax rules around misclassification of sole traders is nothing new, having been around for decades, so one would expect those figures to remain consistent from day one. Instead, usage has also plummeted.”
The findings in the FOI response revealed:
- CEST data usage on intermediaries has fallen by 73% since the off-payroll reforms went live on 06 April 2021.
- Overall CEST usage dropped by 50% in the last full tax year (2023-24 versus 2024-25).
- Overall year-on-year falls in usage since 2021-22 are 18%, 31% and 50%.
- Determinations classified as “Outside IR35” for intermediaries have increased from 50% to 64%, despite no change to the tool’s underlying logic.
- Indeterminate outcomes for sole trader engagements have risen to as high as 26% – a quarter of users are left without a clear answer from the tool.
Chaplin added: “It’s deeply problematic that the same government body responsible for enforcing tax status rules also provides a tool used to determine status. CEST has no statutory authority, is not legally binding, and HMRC retains the right to ignore its results. It’s no wonder firms are increasingly turning their backs on CEST.”
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