HMRC has fined the Home Office £33.5 million for ‘careless’ IR35 failures – full details here.
HMRC recently issued DWP with a large tax bill for improperly assessing the IR35 status of contractors. Today, it was revealed that the Home Office has been slammed with a tax bill as a result of “careless” mismanagement.
In April, the IR35 tax amendments went into effect, requiring medium and large firms to determine the tax status of contractors they engage. This was in response to a similar announcement made in 2017, in which public sector organizations were required to follow suit.
The IR35 tax laws have sparked debate, with many experts predicting that the cumbersome and costly revisions would stifle the employment of contractors.
The government has been chastised for not making the rules more clear, and HMRC has now started action against the government.
According to Computerweekly.com, the Home Office has been hit with a £33.5 million tax charge for “careless” use of the IR35 tax laws.
The tax charge was imposed after HMRC deemed the Home Office had been negligent in its implementation of tax avoidance reforms following an assessment of the department’s IR35 compliance processes.
Since April 2017, the Home Office has mistakenly classified several contractors as operating outside of IR35, according to HMRC.
As a result, HMRC expects to receive £29.5 million in tax bills to pay the income tax, national insurance contributions, and interest charges that were lost as a result of the errors.
Due to HMRC’s apparent carelessness, an extra £4 million penalty was added to the bill.
The extra £4 million fee, however, was put on hold for three months to give the Home Office time to improve its internal procedures.
A spokeswoman for the Home Office assured that the incorrect determinations were a “minor administrative error” that was being addressed.
“HMRC has acknowledged that the Home Office made every effort to resolve this matter promptly and effectively, and has deferred the penalty issued while the cooperation continues,” the spokeswoman said.
“The Home Office says it needs to ‘monitor compliance,’ which reinforces what I have been saying for a long time – a single assessment is not enough, and firms need to be regularly checking status and gathering evidence to support their original status determinations,” said Dave Chaplin, CEO of compliance solution IR35 Shield.
“To thrive in business, you must have certainty.
“It destroys.” Brinkwire Summary News. “If commercial contracts cannot be entered into with assurance, it destroys.”