Yet another high profile public sector body has become victim to the cost of implementing off-payroll legislation, with revelations that HS2 has set aside £9.5 million in their accounts to cover errors made. The rail group has confirmed it had used HMRC’s Check of Employment Status for Tax (CEST) tool as well as accompanying guidance, but despite this they have provided for a significant liability.
The HS2 accounts cover the 12 months to 31 March 2022 and state that an internal review, coupled with additional guidance from HMRC, revealed HS2 did not carry out employment status determinations on a number of contractors because they were supplied by a third-party provider. Their report states: “During 2020, internal checks and additional HMRC’s guidance highlighted some cases of workers who were engaged through other suppliers that had not been appropriately reviewed.”
The problem was that HS2 considered the supply to be a ‘contracted out service’, in which case responsibility for determining tax status should have been on the supplier rather than HS2. However, it seems that the service was actually provision of labour (and not a contracted out service) meaning that HS2 should have assessed the tax status of the contractors.
The £9.5m figure has been extrapolated back to April 2017. HMRC is undertaking a historic assessment of contractor tax status at HS2 and in due course will confirm the additional tax liability incurred.