In a recent tribunal dispute, HMRC’s legal team tried to have evidence based on its own IR35 tool, CEST, struck out, calling it “irrelevant.” (Contractor Calculator)

That’s not a rhetorical flourish. It’s a legal admission that even HMRC does not (or cannot) fully trust CEST.

So, if the state won’t stand by its own tool, why should contractors, clients, or agencies?

The myth of “certainty” via CEST

When CEST launched, it was promoted as a path to clarity. Use it, get your “outside IR35” or “inside IR35” result, and move on, or so the thinking went.

But tribunal decisions keep proving that CEST doesn’t stand up to scrutiny:

• In one key tribunal, HMRC’s counsel stated that “the form, content and application of CEST … is irrelevant to the issues to be determined by the Tribunal.” (Gunnercooke)
• CEST has been overruled in multiple cases, with judges instead applying established case law on employment status. (Goqdos)
• Critics highlight that CEST fails to fully consider mutuality of obligation and working practice nuances. (Fairford Tax Consulting)
• Even HMRC’s own audit shows the tool produced different results to tribunal findings in several cases. (HMRC)

In short, CEST can guide, but it cannot protect. It carries no legal authority, isn’t statutory, and remains non-binding.

The tax bills that tried to hide behind CEST

The numbers speak for themselves.

Public sector bodies that relied on CEST have collectively faced £263 million+ in tax bills, despite using the tool with HMRC support. (Gunnercooke)

Here’s the breakdown:

• HM Courts & Tribunals Service: £13M
• Department for Work and Pensions: £88M
• Home Office: £29.5M + £4M
• DEFRA: £86.5M
• Ministry of Justice: £72.1M + £15M

Each of these departments applied CEST, documented their determinations, and still lost. When the results were challenged, the tribunals focused on facts and contracts, not CEST outcomes.

That’s the takeaway: when it matters most, CEST won’t stand up in court, and HMRC won’t stand by it.

The case for insurance-backed protection

Given the evidence, contractors and organisations need more than a tick-box tool.

Here’s what a safer approach looks like:

1. Combine tools with legal review. Use CEST if you wish but always supplement it with independent assessment and professional advice.
2. Document your reasoning. Keep written records of working practices, supervision, and control; they’re your defence if HMRC challenges your status.
3. Consider IR35 insurance. Services like Kingsbridge’s IR35 Protect cover both legal defence and tax liability, protecting all parties in the chain.
4. Stay current. IR35 case law evolves. What was compliant in 2022 may not pass in 2025. Regular audits keep your risk low.

You don’t buy peace of mind from a government website. You build it through proactive risk management.

The 2025 small company exemption; a quiet shift with big implications

From 6 April 2025, the thresholds for a company to qualify as small - and therefore be exempt from off-payroll IR35 responsibilities - are rising:

• Turnover not more than £15 million (up from £10.2 million)
• Balance sheet total not more than £7.5 million (up from £5.1 million)
• Average number of employees 50 or fewer (unchanged)
  (ICAEW)

To qualify, a business must meet at least two of these criteria for two consecutive financial years. That means for most, the earliest real change will take effect from April 2027.
(Contractor UK)

Around 14,000 companies are expected to regain exemption; a significant number, but not a licence to relax. The underlying IR35 principles still apply to contractors themselves.

What to do next

If you’ve been relying solely on CEST, now’s the time to review your approach.

Here’s your next-step checklist:

• Review which clients could soon qualify as small under the new rules.
• Audit engagements where CEST was the only assessment method.
• Adopt a multi-factor IR35 process with documented legal reasoning.
• Put insurance in place for potential HMRC challenges.
• Educate teams and clients on the limits of CEST and the implications of tribunal rulings.

CEST was sold as a certainty.

But when even HMRC calls it “irrelevant,” it’s time to rethink what compliance really means.

Real protection doesn’t come from ticking boxes.


It comes from clarity, evidence, and preparation.