The £300m hole created by public sector IR35 bills is “astonishing” and “ironic” and it could demonise contractors further in the private sector

UKRI hit with £36m IR35 bill, taking non-compliance in public sector to £300m

Another public sector body, UKRI, has revealed it was hit was a multi-million-pound IR35 bill (of £36m), taking non-compliance in the public sector to around £300m. And guess who’s footing the bill? Taxpayers.

However, in the end, it could be contactors that pay the ultimate price if IR35 reforms continue to demonise contractors and more blanket bans on contractors in the private sector arise after the latest maga pubic sector IR35 bill.

“Innovate is a firm responsible for dishing out cash to UK firms to help them fuel growth by doing amazing things. Now they have £36m less to help those firms,” says Dave Chaplin in a LinkedIn post.

The sarcasm was not lost in Chaplin’s response to yet another IR bill to be footed by taxpayers and tightening belts of government-backed departments even more. “Slow hand clap for the Conservatives, who waived through this IR35 nonsense. I don’t recall the impact statement presented to Parliament mentioning that IR35 would stifle UK growth by reducing funding by £36m.”

“The public sector bills were previously reported to be £263m,” says Chaplin. “With £36m more, we are £1m away from the Government issuing themselves with £300m tax bills. I think HMRC will collect it, and give it to Treasury, who then give it back to the firms who need a top-up. Meanwhile, contractors can claim back full refunds, and the Treasury is poorer by £36m. Bravo eh.”

IR35 specialist, Qdos, has also responded to the news that another public sector body has been issued a multi-million-pound tax bill after being found to have breached the off-payroll working rules (IR35).

“Public sector bodies have now been hit with around £300m worth of IR35 bills. It’s astonishing,” says Qdos CEO, Seb Maley.

“These bodies should be leading by example, showing private sector businesses how to successfully manage the off-payroll working rules,” he says.

“I’m not sure what’s more worrying – the sheer size of this bill or the fact that it’s something we’ve come to expect in the public sector. And I can’t help but wonder who’s next,” says Maley. 

Maley says it is “difficult not to see the irony in this one”.

He continues, “As a body that champions innovation, getting to grips with the off-payroll working rules shouldn’t be an issue for UKRI in theory.

“It’s wooden dollars in the public sector, but if a private sector business was hit with a £36m bill, it could be curtains. With this in mind, private sector firms must prioritise their compliance.”