In a development that has been described by one industry expert as “somewhat ironic”, it has emerged that the non-departmental funding body UK Research and Innovation (UKRI) owes HM Revenue & Customs (HMRC) backdated tax amounting to £36 million.
The significant tax bill – as reported by Computer Weekly – was discovered after a review of the public sector organisation’s arrangements for IR35 compliance found that historic errors had been made in how it classified some of its contractors’ employment status.
UKRI receives sponsorship from the Department for Science, Innovation and Technology (DSIT), and supports the work of nine different research councils – one of which is Innovate UK, the country’s innovation agency.
What else is known about the organisation’s unanticipated tax bill?
It was UKRI’s annual report and accounts for the financial year of 2021-2022 that revealed Innovate UK had been in breach of HMRC’s IR35 legislation that is designed to tackle tax avoidance. A review revealed that mistakes had been made in the agency’s classification of its monitoring and assessment officers.
As a consequence of these errors, UKRI has been left owing the tax body some £36 million in unpaid income tax and National Insurance Contributions (NICs) for the tax years from 2018-2019 to 2021-2022, according to the organisation’s accounts.
The document stated: “Following a review of the IR35 status of monitoring and assessment officers engaged by Innovate UK, UKRI has concluded that some of these monitoring and assessment officers should have been considered to be inside the scope of [the] IR35 regulations, and thus subject to income tax and National Insurance Contributions”.
The mistakes happened after the way in which IR35 rules work in the public sector was reformed in April 2017. Prior to that date, it had been permitted for contractors to determine for themselves whether the work they undertook – and how it was performed – meant they should be taxed the same way as salaried workers (inside IR35) or off-payroll employees (outside IR35).
By contrast, from April 2017 onwards, it became the responsibility of public-sector end-hirers to determine whether the contractors they engaged ought to be classified as working inside or outside IR35.
If there is any solace for Innovate UK, though, it is that it is far from the only public-sector organisation to have ended up with a hefty unpaid tax demand from HMRC following the 2017 IR35 reforms; others have included the Department for Work and Pensions (DWP) and the Department for Environment, Food and Rural Affairs (Defra).
Nonetheless, the irony of the situation was not lost on Dave Chaplin, the CEO of an IR35 compliance firm, who said to Computer Weekly that it illustrated the difficulties IR35 imposed on public-sector organisations that depended on “frictionless access to talent” in order to thrive and expand.
He observed: “UKRI is supposed to be helping firms to innovate to ensure that the UK can compete and succeed on a global stage – to do that, the likes of Innovate need frictionless access to the talent they need when they need it, without risk.
“It is therefore somewhat ironic to learn that the very arm of the UK that is funded by the taxpayer to promote UK growth is being hit with a significant IR35 tax bill.”
We can provide a wide range of support with your tax and accounting responsibilities
If you would like to put yourself – or your organisation – in the strongest possible position from an accounting and tax perspective for years to come, please don’t hesitate to enquire to the TS Partners team to find out more about how we could assist.
Whether you would appreciate help with Self-Assessment in Plymouth, Corporation Tax in Wellington, or payroll services in Newton Abbot – to cite just some of our areas of knowhow – it couldn’t be easier to get chatting about your needs to our excellently qualified professionals.
In recent years, we’ve witnessed a significant shift among company car drivers, especially directors of owner-managed businesses, towards Electric Vehicles (EVs) to capitalize on the available t…
What is Land Remediation Tax Relief? If your property is owned or leased by a limited company, you (whether landlord or tenant) may be able to get tax relief on the costs of removing the asbestos and …
Navigating the UK business terrain, it’s clear that the right funding can pivot your growth trajectory. With this in mind, TS Partners has teamed up with Swoop, creating a bridge between your f…
Despite the limited tax breaks for UK commercial property owners or investors, many overlook the significant tax relief provided by capital allowances. This oversight often arises from unfamiliarity w…
For a while now, there have been persistent suggestions that the UK could be on the verge of entering a recession – and according to at least one authoritative source, that moment may finally come l…
Following an extended period of time in which the outlook did not seem greatly positive for very many businesses in the UK, our experts at TS Partners were cheered to read that according to one new bu…
Talk of recession risk for the UK is becoming a very well-worn theme at this point, but it is also sadly true that many an accountant in Newton Abbot – and their clients – must bear such a risk in…
As things stood at the time of this article being written, the destination of the Women’s World Cup trophy was yet to be decided; nonetheless, the England team has already captured the imaginations …
Firms around the South West of England – including many taking advantage of TS Partners’ expertise in accounting in Newton Abbot – seem to be remaining confident as the summer of 2023 wears on, …
Recent months, it is fair to say, have been ones of ups and downs for many UK business owners, who have been anxious to see reasons for optimism. The UK did at least avoid what had once been a widely …
It has been clear for all to see in recent times that firms across the UK have been buffeted by a range of adverse factors, not least inflation and climbing interest rates. However, at least one recen…
There sadly isn’t a lack of indicators of the exceedingly challenging situation for many small businesses in the UK – and beyond – at the moment. Sure enough, another one has emerged, with it be…
According to at least one source, it would seem that confidence in the UK economy among the country’s business leaders has declined markedly recently, erasing the progress that had been made in this…
In news that will not be cheering for the Bank of England (BoE) as it continues to struggle to drive down inflation, it has emerged that a far greater number of companies in the UK services sector are…
Amid continuing concerns about inflation and the economy, it seems that the UK Government has at least some reason for cheer: the “tax gap” for the year 2021 to 2022 has remained at its lowest eve…
It isn’t just businesses up and down the South West of England and beyond – including many that have reached out to TS Partners about our digital accountancy in Plymouth, Wellington, or Newton Abb…
UK organisations that are keen to take responsible and compliant approaches to their tax and accounting in Newton Abbot, Plymouth, or Wellington may be interested to read about new Government plans th…
No doubt that for many of our blog readers, the various business surveys, indexes, and barometers will be key topics of reading and conversation, as business owners around the UK assess the prospects …