The Department for Business and Trade (DBT) paid £99 million in 2025-26 to settle the Post Office’s historic IR35 tax liability with HMRC, its latest annual report and accounts confirm.
The accounts list the payment among the year’s Post Office funding, stating it was "to settle Post Offices’ historic IR35 Tax liability with HMRC" (DBT Annual Report and Accounts 2025-26, page 49). The notes add that the provision "has crystallised in year, and has been settled with HMRC by 31 March 2026" (page 214).
Because the Post Office relies on DBT for financial support, the bill has ultimately landed with the taxpayer. One government body has, in effect, paid another.
How the IR35 tax bill grew
The Post Office’s IR35 problem first surfaces in 2023-24, when it booked a £72 million provision for potential penalties. Within two years the figure had risen to £103 million before being settled at £99 million.
|
Year |
What the accounts record |
Amount |
Source |
|---|---|---|---|
|
2025-26 |
Provision used to settle with HMRC; £8m written back, £4m discount unwind; nil left at 31 March 2026 |
£99m paid |
DBT ARA 2025-26, pp. 49, 212, 214 |
|
2024-25 |
DBT takes on the liability as a new provision at 31 March 2025 |
£103m (£107m undiscounted) |
DBT ARA 2024-25, pp. 215–216 |
|
2023-24 |
Post Office Limited recognises a provision "for additional penalties" linked to "potential inaccuracies" in applying IR35 |
£72m |
Reported in DBT ARA 2024-25, p. 216 |
When did it start?
The earliest date the accounts give for IR35 errors in the department is April 2017. DBT’s core department paid HMRC £5.8 million for "erroneous management of IR35" on contractors’ income tax and National Insurance covering 2017-18 to 2023-24 (DBT ARA 2024-25, page 116).
April 2017 is when the off-payroll rules made public sector bodies responsible for deciding their contractors’ IR35 status. DBT’s 2023-24 accounts make no mention of the Post Office liability at all.
Dave Chaplin, CEO of IR35 Shield, said: "£99 million is not a rounding error, and the taxpayer has picked up the bill. Since April 2017, public bodies have been legally responsible for deciding the IR35 status of their contractors and have been using HMRC’s own status checker tool (CEST).
HMRC appears to be collecting tax bills created by use of its own tool."
Notes
All figures come from the Department for Business and Trade’s published annual reports and accounts (ARA). Page numbers are the printed page numbers.
|
Fact |
Source |
Page |
|---|---|---|
|
£99m paid "to settle Post Offices’ historic IR35 Tax liability with HMRC" |
49 |
|
|
Provision table: opening £103m, £8m written back, £99m utilised, nil closing |
212 |
|
|
Provision "crystallised in year" and settled with HMRC by 31 March 2026 |
214 |
|
|
New IR35 provision of £103m (£107m undiscounted) at 31 March 2025 |
215 |
|
|
Post Office’s £72m provision in 2023-24 for IR35 penalties |
216 |
|
|
Core department’s £5.8m IR35 settlement covering 2017-18 to 2023-24 |
116 |
