3rd August 2021

Is it any wonder employers are worried about the IR35 rules?

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As employers the length and breadth of the land struggle to come to grips with their new obligations for off-payroll working in the private sector, does it make us feel better or worse that one of the government’s own departments has spectacularly fallen foul of the rules?

Following publication of the DWP’s most recent set of accounts it has emerged that an HMRC review into the DWP’s application of the IR35 rules revealed that it had incorrectly assessed the employment status of its contractors over a period of several years.

As a result of the review, which examined cases going right back to 2017, the year the rules changed for public sector employers, the report states that the DWP agreed the historic errors and accepted a liability for missing tax and National Insurance plus interest for the financial years 2017-18 (£21.1m), 2018-19 (£36.7m), and 2019-2020 (£29.7m).  There was also an agreement to accept a further £0.4m liability for IR35 assessment errors occurring during the 2020-21 financial year, bringing the total amount repaid to £87.9m.

In the report the DWP claims to have used HMRC’s CEST tool to assess the status of its contractors.  We do know that an updated version of the CEST was released in late 2019, but there are still concerns within the payroll community about its effectiveness.  If the CEST tool was used correctly, the scale of the errors found at the DWP would suggest employers’ concerns are justified.   If you are worried about applying the IR35 rules, MBKB can help. Contact us for more information about our off-payroll working training course train@mbkbgroup.com

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