HM Courts and Tribunals Service pays £12.5m bill for IR35 failings

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HM Courts and Tribunals Service has become the latest government department to fall foul of IR35 rules. The department was hit with a £12.5 million tax bill by HMRC in relation to incorrect assessments of workers’ employment status, according to its annual report for 2020/21. In 2019, the Ministry of Justice was told to revisit employment status determinations made between April 2017 and April 2020. The tax liabilities related to undisclosed number of workers who were previously concluded as operating outside of the off-payroll working rules by HMRC’s Check Employment Status for Tax (CEST) tool. It follows the news that the Department of Work and Pensions was hit with an £87m tax bill and the Home Office a £29m bill in relation to incorrect IR35 status determinations. Dave Chaplin, CEO of compliance platform IR35 Shield said HMRC’s CEST tool was “failing fast” – particularly due to its over-reliance on substitution. “Over the last few years, many industry experts have pointed out CEST’s failings to HMRC but those messages were ignored and now we are witnessing the fallout and financial damage,” said Chaplin. “My advice to anyone who has used CEST is to revisit your determinations and if they rely on a valid right to substitute then seek advice on the correct interpre