Home Office hit with huge IR35 tax bill

Understanding the directors loan account. Directors current account
Written by Phil Ainley
Last updated August 5, 2021

It has recently emerged that the Home Office has been hit with a £33.5 million IR35 tax bill after a review of its compliance process was found to be “careless”.

The tax bill includes a £4 million fine for incorrectly determining the IR35 status of contractors and had determined many contractors as incorrectly working outside of IR35. Which is similar in reason to why the DWP was also hit with an IR35 tax bill this year.

The tax bill was revealed in the recently published Home Office annual report and accounts for 2020-2021.

Not the first instance of incorrect status determinations

This is not the first time the government has been caught out by the taxman for incorrect IR35 determinations. Recently published accounts by the Department of Work and Pensions revealed it had been hit with a tax bill in excess of £87 million. While NHS Digital received a tax bill for £4.3 million in November 2019.

 

If the government can’t get it right then how can it expect everyone else to?

Everyone is fully aware of how complex IR35 can be, however at the very least shouldn’t the government have gotten its own house in order with regards to the reform before imposing it on everyone else.

Problems can occur at the outset with the way contracts are drafted. It is advisable to ensure draft contracts are overseen by an employment status expert to ensure they are compliant. A key point that typically crops up is the difference between what the contract says and what the actual working practices are.

The reform is complex for lawyers and employment experts to understand, so how does the layman who runs a business that employs contractors decipher the reform in a way that is compliant?

 

To find out more about the IR35 reform and how fee-payers can successfully navigate the IR35 maze, click here to read and download our ‘Fee-payers guide to IR35’.

 


Sources:

‘Careless’ Home Office hit with £33.5m IR35 bill – Contractor Weekly

 


Understanding the directors loan account. Directors current account
Written by Phil Ainley
Last updated August 5, 2021

Related IR35 content

HMRC launches consultation into IR35 ‘double taxation’

HMRC has confirmed that it has launched an 8-week consultation on plans to roll out a legislative tweak that could…

Read more

Heigh-ho, heigh-ho, it’s back to Chapter 10 we go!

The vast majority of limited company contractors would have gone to work with a spring in their step when they…

Read more

Plans to repeal IR35 scrapped by new Chancellor

It’s been an eventful few weeks in UK politics and for the UK economy. With the pound struggling against the…

Read more

Off-payroll working legislation IR35 reforms to be repealed from April 2023

On Friday 23 September 2022, as part of his mini-budget speech, the Chancellor of the Exchequer, Kwasi Kwarteng, committed to…

Read more

More tax avoidance schemes identified by HMRC

At the end of August 2022, it came to light that HMRC had identified three more tax avoidance schemes as…

Read more

Will the new prime minister amend IR35?

On 5 September 2022, Liz Truss was elected – with 57.4% of the vote – as the new prime minister…

Read more

Top TV stars to pay more tax and potentially lose some freedom in contract crackdown

Broadcaster set to force their top TV stars to work PAYE In a recent story published by The Sun1, it…

Read more

IR35: Private sector firms warned of potentially large HMRC penalties on the horizon

HMRC confirmed it would take a “light touch” in regards to enforcing the new IR35 rules for the initial 12…

Read more

IR35 one year on. 60% of contractors report drop in income.

The results are in! Firstly, we’d like to say thank you to everyone who got involved in our IR35 survey,…

Read more

Contractors could be entitled to reclaim tax if IR35 is misapplied

In recent articles by ft.com and contractorweekly.com, it has come to light that HMRC has acknowledged that contractors could be…

Read more

Investigation into the IR35 reforms launched by the National Audit Office (NAO)

A recent report by the National Audit Office (NAO) has stated that Her Majesty’s Revenue and Customs (HMRC) faces new…

Read more

Seven year nightmare over for presenter Adrian Chiles as Basic Broadcasting Limited wins IR35 appeal

A positive IR35 case ruling has been made for presenter Adrian Chiles and his media company Basic Broadcasting Limited, after…

Read more

Umbrella consultation underway

Umbrella company consultation The government has launched a consultation into the role that umbrella companies play in the labour market…

Read more

Former SKY Sports presenter landing with heavy IR35 tax bill

Former SKY Sports presenter loses IR35 tribunal appeal Former SKY Sports presenter Dave Clark has lost his IR35 tribunal appeal…

Read more

Blanket contractor IR35 decisions U-turn by Network Rail

Computerweekly.com recently reported that Network Rail appears to have performed a U-turn of its IR35 blanket decisions for the rail…

Read more

HM Courts & Tribunal Service becomes the third government department to be hit with IR35 tax bill

Government departments have been in the news recently for their incorrect assessments of the employment status of their contractors in…

Read more

Home Office hit with huge IR35 tax bill

It has recently emerged that the Home Office has been hit with a £33.5 million IR35 tax bill after a…

Read more

DWP hit with huge tax bill for historic IR35 contractor status assessment errors

It has emerged that the Department for Work & Pensions (DWP) was hit with a huge £87.9 million tax bill…

Read more

IR35 private sector changes to go ahead next week

Changes to IR35 in the private sector will go ahead on 6th April 2021, despite hopes for a further delay….

Read more

Kaye Adams wins case and is ruled outside IR35 due to being ‘in business on own account’

A case that will be welcomed by PSCs In a landmark IR35 case that will be welcomed by PSCs, but…

Read more

UK Supreme Court rules that Uber drivers are workers not self-employed

Thousands of Uber drivers could be entitled to minimum wage The Supreme Court’s unanimous decision should come as no surprise…

Read more

Private sector IR35 soon to be reality

On April 6th 2021, the contractor’s worst scenario will become reality… IR35 in the private sector will finally go live….

Read more

Just 2 months left until the IR35 reform: what do contractors need to know?

On the 6th April 2021, the IR35 private sector changes will come into effect. With this date now just a…

Read more

The blanket approach to IR35

The delay in the introduction of the IR35 legislation allowed contractors and their clients extra time to prepare. It also…

Read more

IR35 news: Eamonn Holmes loses his IR35 case against HMRC

Holmes, a broadcaster for over 40 years, was providing his services through a limited company called Red, White and Green…

Read more

HMRC “kicks back” in latest IR35 case

HMRC “kicks back” at Upper Tribunal in latest win against Paul Hawksbee In July 2019 we saw the fight between…

Read more

Off-payroll working in the private sector

IR35 is coming Despite the protests and lobbying of the Government, the only reference in the Budget notes makes it…

Read more

The impact of finance sector IR35 decisions on contractors

IR35 reform to the private sector was already having a negative impact on contractors working in the finance sector prior…

Read more

Lord’s committee expresses concerns over IR35

IR35 off-payroll reform was due to be rolled-out to the private sector on April 6th of this year, but due…

Read more

Suggestions to move IR35 reforms to 2023 are rejected

Amendments to the IR35 private sector are set to go ahead from April 2021, despite suggestions from a Conservative MP…

Read more

COVID-19 and IR35: Should your clients relax now the legislation is postponed?

Changes to off-payroll working in the private sector delayed 12 months Steve Barclay, the Chief Secretary to the Treasury, announced…

Read more

11th hour delay for IR35 private sector reform due to COVID-19 welcomed

The Government has delayed its controversial IR35 private sector reform by one year, until April 2021, because of the COVID-19…

Read more

No delay to IR35 rollout as the Government launches off-payroll review

The Government launched its off-payroll review on January 7th with regards to the implementation of the changes to the off-payroll…

Read more

What are the political parties saying about IR35?

The changes that will alter how freelancers’ taxes are assessed In April 2020 the contractor and freelance community are set…

Read more

Six reasons for PSCs to be proactive to respond to the IR35 private sector changes and not wait until April 2020 to do so!

Since April 2000, the Intermediaries legislation has made the individual contractor trading through his/her own Personal Service Company (PSC) the…

Read more

What impact will IR35 reforms have on North Sea operators?

With high levels of talent engaged through off payroll structures in the energy sector, the North Sea operators will feel…

Read more

Are you ready for IR35 changes?

Proposed changes to IR35 legislation could mean thousands of contractors may pay more tax. With the Government’s consultation on contracting…

Read more

IR35 and CEST Update

The IR35 story continues to rumble on taking twists and turns along the way and most of us believe it…

Read more

U-Turn on Self-employed NIC but no change to Public Sector rules on IR35

The ink has yet to dry on Philip Hammond’s first budget as Chancellor but his proposed national insurance increases for…

Read more

IR35 Products & services

Caunce O’Hara’s partnership with Markel enables us to offer a broad range of IR35-based products to protect contractors, fee-payers and end clients across the UK.

IR35 Hub Related IR35 content