Government non-compliance with IR35 rules is unacceptable, say MPs

‘Widespread non-compliance’ with IR35 tax reforms in central government departments is ‘not acceptable’ after HMRC ‘rushed implementation of the reforms; provided poor guidance; and public bodies struggled with its tool to assess status’.

This is the conclusion reached by the House of Commons public accounts committee in a new report.

The committee considered that government bodies should be best placed to understand the reforms but in 2020-21 it became clear that many departments had struggled to comply with the reforms and owed or expected to owe tax of £263m.

Many public bodies reported that the reforms caused problems with recruiting contractors and some contractors said to avoid perceived risks of failing to comply their clients were changing hiring practices - such as no longer engaging workers through personal service companies.

According to MPs HMRC has ‘done little to understand the wider impact...