Impact of HMRC’s updated check employment status for tax tool

When a business engages an individual to provide services otherwise than as an employee the business needs to determine whether the individual can be paid ‘off-payroll’ on a self-employed basis. Notwithstanding that they may not be an employee under employment law an individual may still need to be taxed as an employee on income they receive from the business.

HMRC’s check employment status for tax (CEST) tool is commonly used to determine an individual’s employment status for tax purposes. HMRC recently launched a new version of the tool labelled CEST 2.0. This article discusses the impact the new tool may have on businesses making employment tax status determinations most notably in the context of the IR35 rules.

Employment status for tax purposes

Before discussing CEST 2.0 it’s helpful to outline the test for employment status for tax purposes. There is no single test...