Clear, Compliant, and Scalable: How TEST Simplifies IR35 Risk Management

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HMRC’s ongoing focus on IR35 - most recently reflected in the update to their own status tool - demands that organisations make accurate, well-documented employment status determinations for contractors and external workers. The implications of non-compliance extend beyond fines, compromising operational continuity, talent retention, and corporate reputation. Alvarez & Marsal’s Test Employment Status Tool (TEST) is designed to help organisations tackle this challenge head-on. By automating determinations and streamlining documentation, TEST empowers businesses to manage risk, ensure compliance, and make informed decisions.

The Challenge of IR35

The IR35 off-payroll working rules require medium and large businesses to determine whether individuals providing services through a Personal Service Company (PSC) should be treated as employees for tax purposes. HMRC’s own solution, CEST, has been criticised for its ambiguity, with one in five assessments resulting in an 'undetermined' status—creating uncertainty and administrative burden.[1][2] Although HMRC recently updated CEST to include additional questions, they have been clear that its underlying logic remains unchanged.

Organisations face significant financial risks, as they are responsible for ensuring the correct Income Tax and National Insurance Contributions (NICs) are paid when contractors fall inside IR35. Considering this, a dependable scalable solution is required to match internal policies and risk frameworks, for businesses to demonstrate good governance.

TEST: Built for Compliance and Beyond

Alvarez & Marsal developed the TEST platform to overcome these challenges. The TEST platform uses a two-survey system to automate employment status evaluations by collecting data from both the contractor and the engager.

It delivers:

Deterministic outcomes—no more 'too difficult to determine' results.
Instant generation of Status Determination Statements (SDS).
Full documentation trail to support audit-readiness/HMRC compliance.
Seamless integration with internal HR, tax, and procurement workflows.
User-friendly, intuitive, administrator dashboard.
Scalable and future-proof.

A Strategic Advantage

TEST is not just a compliance tool—it’s a strategic enabler. By delivering clarity on workforce composition and tax status, it allows organisations to proactively manage off-payroll engagement. With its scalability and configurability, TEST adapts to future legislative changes and workforce shifts. The tool’s capabilities decrease the need for external advisors, leading to sustained savings for the organisation. Most importantly, its structured outputs and audit trail provide peace of mind in the face of increasing HMRC scrutiny.

Real-World Application

TEST has been successfully deployed across a range of sectors—from financial services and professional consulting to logistics and technology. In each case, the tool has reduced processing time, improved data consistency, and ensured stakeholder alignment. Clients appreciate TEST’s ease of use, its custom branding options, and the transparency it offers across business units.

Conclusion and Next Steps

Organisations that treat IR35 compliance as a strategic priority gain more than tax protection—they gain clarity, consistency, and control over their contingent workforce. TEST is the trusted platform that delivers on all these fronts.