DWP hit with £87.9m tax bill by HMRC over ‘historic’ IR35 status contractor assessment errors

by Jeremy

The Department for Work and Pensions (DWP) paid £87.9m to HM Revenue & Customs (HMRC) after a review of its IR35 compliance procedures revealed that it had incorrectly assessed the employment status of its contractors for several years. The payment details were shown in the publication of DWP’s most recent accounts, which outline the department’s expenditures during the 2020-21 financial year.

Among the expenditures listed was a payment of £87.9m made to HMRC during the 2020-2021 financial year, following the discovery of “historical errors”, dating back to 2017, that DWP made when assessing the tax status of contractors.

The document confirmed that these errors came to light in March 2020 following a review by HMRC into DWP’s implementation of the IR35 tax avoidance reforms, which came into force in the public sector in April 2017.

From this date, public sector organizations – including DWP – assumed responsibility for determining if the contractors they engage with should be taxed in the same way as permanent, salaried employees (inside IR35) or off-payroll workers (outside IR35) based on the work they do and how it is performed. Before then, it was up to the contractors themselves to declare whether their engagements were inside IR35 or not.

Related Posts

Leave a Comment