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Summary of Public Sector reforms (introduced in April 2017)

On 6th April 2017 IR35 (found at Chapter 8 of ITEPA) was replaced with the “Off-Payroll” rules (Chapter 10, ITEPA) in instances where the end client is a public sector body. This change resulted in the assessment burden and potential liability for unpaid taxes no longer sitting with the PSC and instead shifting further up the supply chain. The responsibility for the employment status assessment now sits with the public sector end client, and should they deem that the off-payroll rules apply, the responsibility for making employee tax deductions and accounting for employers NICs sits with the entity that pays the workers PSC. This entity is known as the “fee-payer”. In some instances, the fee-payer may be the end client themselves, but if a recruitment agency has been involved in the placement, the agency would usually be the fee-payer since they would usually sit in the contractual chain in-between the end client and the workers PSC.

In order to assist hirers/end clients with their new assessment responsibilities, HMRC developed a new digital tool referred to as CEST (Check Employment Status for Tax). The tool navigates the user through a series of questions, with the specific route through the questions changing depending upon the answers given. Once completed the tool gives an employment status determination in most cases (85%), but in some instances further investigation will be required.

The CEST tool is not compulsory and is an online resource that can be used by other parties in the chain for information purposes (although the official responsibility for employment status assessment always sits with the public sector end client).

The CEST tool can be found here:


The CEST tool has been subjected to heavy criticism since its introduction. Arguments have been made that it does not align with established case law, partly because of the fact that it disregards assessment around mutuality of obligation and assumes that this always applies; thereby being biased in its employment status determinations.

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