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Government body finds IR35 too taxing

Government body finds IR35 too taxing

Adrian Marlowe

Adrian Marlowe


Last week, it was reported that UK Research and Innovation (UKRI), a public sector body, was required to pay £36m to HMRC for unpaid levels of IR35 tax. This is reported to have followed an investigation into 285 contractors engaged by UKRI as monitoring and assessment officers, and it follows a string of reports of government bodies being caught for not addressing IR35 correctly.

There is some concern expressed about the circularity (one government body collecting from another), which does seem to be counter productive. Clearly current policy is that government bodies should account for tax in the same way as every other kind of business. It’s difficult to see how else it could work. But the key questions in my mind are as follows:

  • UKRI clearly felt a need to hire contractors rather than employees? This does appear to follow a particular trend within public bodies including HMRC. Who is making these decisions and why?
  • If UKRI used CEST (check employment status for tax) surely the detail of what went wrong should be disclosed? Was it an input error, a failure to follow government guidance, insufficient government guidance, or an inherent defect in CEST? And if UKRI didn’t use CEST, why not?

These all need answering if lessons are to be learned.

More importantly for contractor recruitment suppliers, many public sector terms of business require the agency to agree to tax indemnities including IR35. If UKRI used recruitment businesses to supply their ‘contractor’ officers, is it the case that those agencies will now be asked to pick up the bill? Any agency in that position could ask us to help as we major in this work; but the key point is that something is very wrong with the communications or the system, if the government’s own bodies cannot get IR35 right.

For more information on IR35 from our team of experts, get in contact.

For more information on Employment Status, join us for our  webinar on Thursday 8th June at 11am.

Adrian Marlowe, Managing Director, Lawspeed

Lawspeed group corporate clients benefit from immediate up to date advice on staff engagement and related regulation; employment status; client, IR35, PAYE and umbrella contract templates; contract review/negotiation; self-employment and CIS contract templates; trade membership and government representation; accreditation services and a state of the art digital contract management platform.

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