Business

HS2 hit with final IR35 bill of £6.2m as IR35 reforms continue to face criticism

Published

3 days ago

August 12, 2024

A coalition of industrial leaders has launched a last-ditch effort to implore Rishi Sunak not to scale back the HS2 rail line, warning that “constant changes” to the project were damaging Britain’s reputation among overseas investors.

HS2 has revealed a final IR35 debt of £6.2 million in its 2023/24 accounts, following a compliance assessment by HMRC. This payment completes tax obligations under the Off-Payroll Working Legislation introduced in 2017.

The research found that only 5% of HS2 contractors were classified as outside IR35, raising concerns about the impact of the legislation on public projects. Industry experts argue that the policy creates financial inefficiencies and could deter top talent from participating in government projects.

Commenting on the news, Dave Chaplin, CEO of IR35 compliance company IR35 Shield, said: “HS2’s latest annual accounts have revealed a final IR35 bill of £6.2 million, highlighting the circular and counterproductive nature of off-payroll legislation. the public sector emphasizes.

“First, we are witnessing a bizarre money wave. HS2, funded by the government, pays £6.2 million to HMRC, which goes to the Treasury, with the Treasury then funding HS2 with monies including this £6.2 million. It’s a bureaucratic circus that serves no real purpose.

“The compliance efforts themselves are a net loss for the Treasury Department. The salaries of HMRC agents result in only around a third returning as tax revenue. Add to this the higher costs resulting from putting contractors on the payroll and using consultancy firms, and we see a significant net loss to the public purse.

“The human cost is just as concerning. With only 5% of contractors falling outside IR35, it is likely that top talent will scrutinize the HS2 project, leading to more expensive alternatives.

“Perhaps most alarming is HS2’s reliance on HMRC’s CEST tool, which has clearly let them down. Many private sector companies have long since abandoned CEST due to its well-documented shortcomings.

“Off-payroll in the public sector is essentially a money-losing exercise for the Ministry of Finance. The HS2 accounts prove it, as do the Home Office accounts published earlier this month.

“The private sector is having just as difficult a time. Rachel Reeves is trying to plug a £22 billion hole in the public purse. She could start by looking at the IR35 reforms, which are a textbook example of misguided policy implementation worthy of a Darwin Prize for tax policy.”