DWP was hit by HMRC’s £ 87.9m tax bill over valuation errors by “historic” IR35 status contractors

The Department for Work and Pensions (DWP) paid HM Revenue and Customs (HMRC) £ 87.9 million after a review of IR35 compliance procedures revealed that it had misassessed contractor employment status over the years. It was.

Payment details were revealed in DWP’s latest series of accounting publications. It provides an overview of sector spending during the 2020-21 fiscal year.

Some of the listed expenditures will be included in HMRC in the 2020-2021 fiscal year, following the discovery of a “historical error” dating back to 2017 by DWP in assessing the tax status of contractors. There was a payment of £ 87.9 million made against it.

The document confirmed that these errors were revealed in March 2020 after HMRC considered implementing IR35 tax avoidance reforms by DWP. Effective in the public sector in April 2017..

From this date, public sector organizations, including DWP, will be taxed on the basis of their work by the contractors they work for in the same way as full-time employees, salary workers (within IR35) or off-payroll workers (outside IR35). You are responsible for deciding whether or not it should be. They do so and how it is done. Prior to that, it was the contractor’s own responsibility to declare whether the contract was within IR35.

The internal IR35 decision means that the contractor is expected to pay the same amount Income tax and national insurance premiums (NIC)) As a full-time employee. However, you are not entitled to the same workplace allowance as a salaried worker.

“result [of the HMRC review] For historical errors and tax / national insurance shortages in fiscal years 2017-18 (£ 21.1 million), fiscal year 2018-19 (£ 36.7 million), and fiscal year 2019-2020 (£ 29.7 million) It was an agreement on DWP approval of debt and interest. ) ”, The report said.

The department also agreed to accept an additional £ 400,000 of liability for IR35 assessment errors that occurred during the 2020-21 fiscal year following HMRC’s review, the document confirmed. That’s a total of £ 87.9m.

“In 2020-21, the department resolved HM Revenue and Customs and IR35’s tax obligations in connection with a false assessment of the contractor’s employment status,” the document added.

“This payment [of £87.9m] It is related to unpaid taxes and interest on their delinquency. The department has not paid penalties for non-compliance. “

During the 2020-21 fiscal year, DWP contracted with 1,025 contractors and paid at least £ 245 a day for its services. Of these, 35 had their IR35 status fixed during this period as a result of what is called a “consistency review” in the account documentation.

Accounting also confirms that BPDTS, a limited liability company and an independent company specially established to provide digital technology services to DWP, also incurred a total of £ 6.9m in IR35-related debt. The entity was absorbed by DWP in July 2021.

The account does not elaborate on the nature of the errors DWP made during the IR35 decision, but that the department notified the decision using the HMRC Status Test Employment Check (CEST) online checker tool. Confirming.

DWP is not the first public sector entity to receive significant IR35-related tax bills after assessing the contractor’s tax status using the CEST tool. NHS Digital received a total of £ 4.3 million in November 2019..

In a statement to Computer Weekly, a DWP spokesperson said he promised to avoid further errors in implementing the IR35 rules.

“DWP has improved our process by promising to ensure that the correct taxes are paid and taking steps, including working more closely with HMRC,” said a spokesman.

Meanwhile, the DWP account documentation details the steps taken by the department to improve the IR35 assessment procedure.So far, this has included a significant investment in time, effort, and resources to improve the position of the department. [the] IR35 requirements “.

By the way, Computer Weekly understands that HMRC has appealed against the results of the IR35 court involving a former DWPIT contractor. Richard Alcock concludes that it was wrong for tax collectors to pursue unpaid tax claims above £ 240,000... The appeal hearing is scheduled to take place in 2022.

HMRC claims that Alcock is obliged to pay NICS and a total of £ 243,324 in income tax contributions arising during a series of contracts with Accenture and DWP from April 6, 2010 to April 6, 2015. I am.

Dave Chaplin, CEO of Contractor Calculator, a contracting authority, told Computer Weekly the fact that DWP used the HMRC CEST tool on IR35. The employment situation decision-making process is noteworthy given the frequency with which the accuracy of the results has been questioned over the years...

“DWP is facing a £ 87m bill and seems to have used a tool encouraged by HMRC, but HMRC doesn’t seem to be waiting now and is unfounded by law. And within the next few months when the Court of Appeals announces its decision, the basics are likely to be questioned.,” He said.

“Unlike private companies, DWP is a public institution, and all the money it provides to HMRC for additional taxes goes directly to its financial resources and goes back to funding the bill in the first place. Paul pays Peter. Is robbing.

“But the key question is, why does DWP even bother to spend hundreds of thousands of pounds to defend its status when the Treasury’s overall rise in financial resources is virtually zero? The situation is ridiculous. “

DWP was hit by HMRC’s £ 87.9m tax bill over valuation errors by “historic” IR35 status contractors

Source link DWP was hit by HMRC’s £ 87.9m tax bill over valuation errors by “historic” IR35 status contractors

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