IR35 costs UK Research and Innovation £36M – the same it spent funding tech projects

UK Research and Innovation (UKRI) has been hit with a £36 million ($44.5 million) bill after miscalculating tax it owed on the country's controversial off-payroll working setup, IR35.

The figure – roughly the same as what the body spends helping organizations move tech from discovery to production – resulted from a review of the IR35 status of Monitoring & Assessment Officers.

These officers "should have been considered to be inside the scope of IR35 regulations, and thus subject to income tax and national insurance contributions," according to the non-departmental public body sponsored by the Department for Science, Innovation and Technology.

For 2017-18 to 2021-22, it is estimated that UKRI will owe tax collector HMRC an additional £36 million for the IR35 error.

Coincidentally, it is the same figure UKRI spent to support research institutions and consortia to "enhance translation from discovery research to impact," according to the report [PDF].

According to tax advisor Qdox, UKRI's settlement adds to the amount owed by public sector bodies for IR35 non-compliance, which currently stands at about £300 million ($371 million).

IR35 was introduced to reduce off-payroll workers who avoid paying regular employment taxes, but critics argue it penalizes those who are employed on a casual basis and do not enjoy employment rights, including pensions, sick pay and holidays. The move hit many of The Reg's readers who work as tech contractors or use their services.

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It came into force across the economy in April 2021 after a year's postponement owing to COVID-related disruption. It was implemented for the public sector in 2017, after which the government's own departments have struggled to comply.

In December 2021, annual reports showed miscalculations cost the Ministry of Justice and the Department for Environment, Food and Rural Affairs a combined sum of £120 million ($148.6 million) for the 2020-21 tax year.

Since then, the MoJ's HMRC audit was closed and all liabilities settled, but an internal review later resulted in a liability of £3.9 million ($4.8 million) due to HMRC for 2021-22.

Meanwhile, a Defra inquiry has found instances where contractors were incorrectly assessed as out of scope. For 2021-22, it accepted an outstanding liability of £63.2 million ($78.2 million) with HMRC. ®