Fine suggests the IR35 public sector rules are not working, say advisers

The Department for Work and Pensions (DWP) has been issued with a tax bill of £87.9m due to incorrectly assessing the IR35 status of contractors engaged since 2017. This was despite it using HMRC’s check employment status for tax (CEST) tool. According to the DWP annual accounts for 2020-21 an HMRC resulted in an ‘agreement on historic errors and acceptance by DWP of a liability for missing tax/NI plus interest for the financial years 2017-18 (£21.1m) 2018-19 (£36.7m) and 2019-20 (£29.7m)’. The £87.9m also includes a liability for 2020-21 of £0.4m.

Blick Rothenberg director Robert Salter said: ‘It is almost laughable that one public organisation fines another in this situation - surely the DWP would have consulted with HMRC to get this right. The fine means the money is going around “one big public sector circle”. It...