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IR35 Rules Relating to Employment Status

The Department of Works and Pensions (DWP)as recently published its annual report and accounts. These included an item of expenditure for £87.9m paid to HMRC in tax year 20/21.

The payment was in respect of underpaid tax plus interest arising from DWP incorrectly assessing the status of  some of its subcontractors. The DWP had used HMRC’s Check Employment Status Tool (CEST) to make the assessments. This would imply that HMRC disagreed with the results produced from its own CEST tool.

It has subsequently  been reported that other government departments have made similar payments to HMRC for the same reason.

The key point to note from this is that it is clearly not an easy task to assess whether subcontractors should be covered by the IR35 rules.