One important piece of context first, because it changes who is legally responsible: as a genuinely small private-sector company, the off-payroll working (IR35) determination duty does not sit with you. For small clients (broadly, turnover of GBP 10.2 million or less, a balance sheet of GBP 5.1 million or less, and 50 or fewer employees), the contractor's intermediary (usually their personal service company) remains responsible for deciding whether IR35 applies. CEST is still exactly the right tool for you both to use, but the legal onus is on the contractor's company, not yours.
How CEST works in practice
CEST is HMRC's free, anonymous online tool (search "Check employment status for tax" on GOV.UK). It asks a series of questions about the engagement and gives HMRC's view: employed (inside IR35) or self-employed (outside IR35) for tax purposes. It takes around 15-20 minutes and you cannot save partway through, so gather everything first.
You will need: the contract details, what the worker will actually do, who decides what work is done, who decides when, where and how the work is done, how the worker is paid, and whether there are any corporate benefits or expense reimbursements.
The questions probe the classic status factors: substitution (can they send someone else?), control (do you direct their work?), mutuality of obligation, financial risk (fixed-price vs hourly, who pays for mistakes), and integration into your business. Crucially, you answer based on how the work will actually be done in practice, not just what the contract says on paper.
Who should answer the questions
HMRC says anyone can use the tool: the client, the contractor, an agency, or a third party. In practice, the best approach is for you and the contractor to agree the answers together, because the tool is only as good as its inputs. Since the contractor's intermediary carries the legal responsibility here, agree the outcome with them in writing and have them run (or at least confirm) the same determination.
Your arrangement's indicators
You are not oversimplifying: working mostly from their own office, using their own laptop, and having a genuine substitution clause all point towards outside IR35. But a substitution clause only carries weight if it is real - meaning the contractor could actually send a substitute and you would accept them - and if the contractor is genuinely running a business (taking financial risk, correcting defective work at their own cost, no mutuality beyond the project). The whole picture matters, which is why running CEST properly is better than relying on one or two factors.
Using CEST properly and keeping records
1. Run CEST before the engagement starts, based on the real working arrangement.
2. Download and save the result at the end. CEST produces a determination with a reference number - keep this, plus a note of the answers you gave and the evidence behind them.
3. Keep everything with the contract and project paperwork for at least 6 years, the usual business record-keeping period. If HMRC ever queries the arrangement, the CEST result plus the contract and working-practice evidence is your defence.
4. Re-run CEST if anything changes: a contract extension, a change in how the work is done, or the contractor working on-site under your direction.
Two final cautions: CEST sometimes returns "unable to determine" - in that case, get specialist advice rather than guessing. And HMRC will stand by a CEST result only if the information given was accurate and complete; answer carefully and honestly, and the tool is reliable.
