In 2025-26, the Department for Business and Trade paid £99m to settle the Post Office’s IR35 tax liability.
Meanwhile, the Foreign Office faced a £15m tax bill after wrongly classifying workers as contractors when they should have been treated as employees.
Seb Maley, of contractor insurance firm Qdos, said: “Nearly a decade on, government still can’t get to grips with the very IR35 rules it imposed.
“More concerning still, the Cabinet Office is one in a long line of departments to have fallen foul of the off-payroll rules in recent years, with combined liabilities running into the hundreds of millions.”
According to the Cabinet Office’s annual accounts, HMRC had been carrying out an audit of the department’s working arrangements since 2019. But the tax liability covers IR35 compliance issues going back to 2017. So far the Cabinet Office has paid £15m of the £38m tax bill.
Dave Chaplin, of tax compliance firm IR35 Shield, said: “For five years, the Cabinet Office told Parliament it had applied IR35 rules with care. HMRC has now concluded that it did not take reasonable care and that its historic processes were careless, thereby incurring a penalty on top of the tax. This raises serious questions about compliance at the very heart of government.”
A Cabinet Office spokesman said: “The figure reported in our accounts is an upper estimate, not a final amount. The issue is still under discussion and final figures will be confirmed in due course.”
