[UK] HS2 pays ‘staggering’ £6.2m to HMRC for mismanaging IR35 off-payroll rules

In the UK, HS2 - the high-speed rail network under construction in England - has been forced to pay £6.2 million to HMRC because it “mismanaged” IR35 Off-Payroll Working rules, ContractorUK reports.

In its latest annual accounts, HS2 states that its OPW liability “could have been” as much as £10.2m, so it set aside this substantial sum.

The figure reportedly represents an upward revision on the £9.5m initial provision HS2 made for IR35 liabilities in the 2021-22 financial year.

However, following a now “concluded” HMRC “compliance review,” HS2’s 2023-24 accounts show it paid less.

HS2 is a limited company. It is led by the ex-CEO of HMRC who oversaw the introduction of IR35 reform, Sir Jon Thompson.

Sir Thompson left the Revenue in October 2019, more than two years after the off-payroll working rules took effect in the public sector under his leadership on April 6, 2017.

The former CEO was HS2’s deputy chair when the first liability was set aside in 2021-22 and is now its executive chair. Yet the 2024 accounts acknowledge that HS2 blundered the “assessment of contractor’s [sic] employment status.”  

In a section titled “Other,” the annual accounts reportedly stipulate that HS2 Ltd paid £6.2m to HMRC as a result.

Rebecca Seeley-Harris - founder of ReLegal Consulting - told ContractorUK that she believes such a large IR35 tax liability, for a government body run by a former HMRC CEO, beggars belief.

“This is an astonishing [development related to]…IR35 mishandling,” Ms Seeley-Harris said.

“There’s really no excuse [for HS2] to get it wrong. Perhaps it’s time for the government to engage some private sector help with assessing IR35? 

“Alternatively, the new Labour government needs to look again at a statutory test or some measure that makes it easier for all organisations to assess off-payroll working.”

In its 2021-22 accounts, HS2 said, “We use HMRC’s own Check of Employment Status for Tax tool and accompanying guidance to make…[our IR35] assessments.

“During 2020, internal checks and additional HMRC’s guidance highlighted some cases of workers who were engaged through other suppliers that had not been appropriately reviewed.”

HS2 is not the only public body to fall foul of off-payroll rules; Defra, UKRI, the MoJ, the DWP and the Home Office have each paid millions to HMRC for poorly managing IR35 after using CEST.

In its latest annual accounts, which cover the 12 months to March 2024, HS2 confirms that it engaged 339 off-payroll workers.

Out of those 339, some 320 were engaged inside IR35, meaning 94% of contractors at HS2 were determined as ‘caught’ (compared with 95% and 93% ‘caught’ in 2022-23 and 2021-22, respectively).

In its 2023-24 annual accounts, HS2 states, “The HMRC review has now been formally concluded and accordingly, there is no provision included for the year ended 31 March 2024.”

Source: ContractorUK

(Links and quotes voa original reporting)

In the UK, HS2 - the high-speed rail network under construction in England - has been forced to pay £6.2 million to HMRC because it “mismanaged” IR35 Off-Payroll Working rules, ContractorUK reports.

In its latest annual accounts, HS2 states that its OPW liability “could have been” as much as £10.2m, so it set aside this substantial sum.

The figure reportedly represents an upward revision on the £9.5m initial provision HS2 made for IR35 liabilities in the 2021-22 financial year.

However, following a now “concluded” HMRC “compliance review,” HS2’s 2023-24 accounts show it paid less.

HS2 is a limited company. It is led by the ex-CEO of HMRC who oversaw the introduction of IR35 reform, Sir Jon Thompson.

Sir Thompson left the Revenue in October 2019, more than two years after the off-payroll working rules took effect in the public sector under his leadership on April 6, 2017.

The former CEO was HS2’s deputy chair when the first liability was set aside in 2021-22 and is now its executive chair. Yet the 2024 accounts acknowledge that HS2 blundered the “assessment of contractor’s [sic] employment status.”  

In a section titled “Other,” the annual accounts reportedly stipulate that HS2 Ltd paid £6.2m to HMRC as a result.

Rebecca Seeley-Harris - founder of ReLegal Consulting - told ContractorUK that she believes such a large IR35 tax liability, for a government body run by a former HMRC CEO, beggars belief.

“This is an astonishing [development related to]…IR35 mishandling,” Ms Seeley-Harris said.

“There’s really no excuse [for HS2] to get it wrong. Perhaps it’s time for the government to engage some private sector help with assessing IR35? 

“Alternatively, the new Labour government needs to look again at a statutory test or some measure that makes it easier for all organisations to assess off-payroll working.”

In its 2021-22 accounts, HS2 said, “We use HMRC’s own Check of Employment Status for Tax tool and accompanying guidance to make…[our IR35] assessments.

“During 2020, internal checks and additional HMRC’s guidance highlighted some cases of workers who were engaged through other suppliers that had not been appropriately reviewed.”

HS2 is not the only public body to fall foul of off-payroll rules; Defra, UKRI, the MoJ, the DWP and the Home Office have each paid millions to HMRC for poorly managing IR35 after using CEST.

In its latest annual accounts, which cover the 12 months to March 2024, HS2 confirms that it engaged 339 off-payroll workers.

Out of those 339, some 320 were engaged inside IR35, meaning 94% of contractors at HS2 were determined as ‘caught’ (compared with 95% and 93% ‘caught’ in 2022-23 and 2021-22, respectively).

In its 2023-24 annual accounts, HS2 states, “The HMRC review has now been formally concluded and accordingly, there is no provision included for the year ended 31 March 2024.”

Source: ContractorUK

(Links and quotes voa original reporting)