Tax and National Insurance
One department changed 42 IR35 decisions in a single year
The Foreign Office reassessed 50 contractor engagements in 2025-26 and changed 42, and anyone told they are inside the rules has 45 days to challenge it.
45 days To get an answer on a status challenge
The Foreign, Commonwealth and Development Office reassessed 50 of its contractor engagements during 2025-26 and changed the status of 42 of them. Only eight kept the status they had. The department made a voluntary disclosure to HM Revenue and Customs in 2024-25 after finding problems with earlier decisions, and has set aside an undisclosed sum for back taxes covering the five years from 2021-22 to 2025-26. It says the final agreed figure will appear in its next annual report. The Sunday Telegraph put the bill at around £15m on 20 September 2026; the department itself has not published a number.
The figures underneath the bill are the striking part.
| FCDO engagements | Inside the rules | Outside |
|---|---|---|
| 2024-25 | 241 | 211 |
| 2025-26 | 438 | 62 |
Roughly half and half became almost 88% inside, in twelve months, at the same organisation.
What “inside” means for the person doing the work
The off-payroll working rules, still generally called IR35, ask one question. If you did this work for the organisation directly, rather than through your own limited company, would you look like an employee? If yes, you are inside, and income tax and National Insurance come off the fee before it reaches your company.
Public bodies have had to make that call since 6 April 2017. That takes in NHS trusts engaging locum doctors and nurses, and councils engaging interim staff. The trust or the council decides — not the agency, not you — and it has to hand you a status determination statement setting out its reasons.
Being inside gets you an employee’s tax treatment. It does not get you an employee’s rights. HMRC’s guidance for the organisation paying you is blunt about it: you are not entitled to employment rights from them, such as holiday pay, and because you are not their employee you get no statutory payments and no automatic enrolment into their pension.
The 45 days
If you think a determination is wrong, there is a formal route with a clock on it. HMRC calls it the client-led status disagreement process. You put your reasons to the client — the manual allows representations verbally or in writing, though writing gives you a dated record of when the clock started.
Beginning with the day your representations are received, the client has 45 calendar days to do one of two things: tell you it has considered them, that the statement was correct, and why; or tell you the statement was wrong, withdraw it, and issue a new one stating the date it applies from.
If it does neither, HMRC’s manual says responsibility for deducting the tax and National Insurance, and for paying the apprenticeship levy, passes to the client — and that applies whether or not it took reasonable care over the original decision. The deadline binds them, not you.
The two things readers get wrong
The first is assuming a wrong determination becomes your bill. Where a public body gets this wrong at scale, as the Foreign Office has, the liability sits with the body. Natural Resources Wales settled with HMRC at £14.6m in October 2025, with a further £2.9m penalty suspended for twelve months while it meets new compliance conditions. The Post Office was issued a bill of £104.4m, which the Department for Business and Trade agreed to fund.
The second is the opposite error: deciding that because the client pays, the determination does not matter to you. It does. It sets what actually lands in your account each month. Inside the rules on a public sector contract you are taxed like an employee on that pay, which is the same arithmetic our NHS take-home calculator runs for a salaried band.
Where these figures come from
- Foreign Office changes 42 IR35 decisions amid HMRC review — IR35 Update
- Foreign Office faces significant IR35 bill — Public Finance
- ESM10015 — Client-led status disagreement process — HM Revenue and Customs
- Understanding off-payroll working (IR35) — HM Revenue and Customs
- Written Statement: HM Revenue and Customs' investigation conclusion into Natural Resources Wales IR35 tax arrangements (24 October 2025) — Welsh Government
Every figure traces to a dated document — the line this section is named after. If one here is wrong, tell us and it gets fixed publicly. Work out your own figures.