First, it was the Department for Work and Pensions. Now it’s the Home Office that owes HM Revenue & Customs millions of pounds because of incorrect assessments of their contractors’ employment and tax status between 2017 and 2021.

The Home Office’s ‘Annual Report and Accounts 2021-22’ acknowledges that HMRC found that the Home Office had been “careless” in applying the off-payroll working rules, therefore being hit with a £4m penalty on top of liability for £29.5m incorrectly assessed plus interest accruing on the outstanding amount. 

However, the report said, the penalty has been suspended for three months, subject to conditions including:

• a 100% assurance check on all ‘out of scope’ determinations
• improved governance around the Home Office’s use of contractors and contingent labour
• improved training of hiring managers
• and improved monitoring and assurance over compliance with IR35, “not just at the point of procurement but throughout the contract life cycle”.

“The Home Office expects to meet those conditions,” the report said.

The current rules for off-payroll workers went into effect for public sector bodies in 2017.

Also contained in the report are statistics for the amounts spent on consultancy services and contingent labour (plus for arm-length bodies) by the Home Office. Contingent labour/agency costs for 2020-21 were £78.1m, £10.8m lower than in 2019-20. For consultancy services, the spend was £32.4m, or £1.3m less than in 2019-20. The full year spend on all was £110.5m, a drop of £12.1m from the 2019-20 spend. 

• Comment below on this story. Or let us know what you think by emailing us at [email protected] or tweet us to tell us your thoughts or share this story with a friend.