Seb Maley of Qdos says the off-payroll system is broken.
Here we provide details and IR35 expert commentary on why, yet again, a public sector body gets off the hook for off-payroll non-compliance and eye-watering large tax bills, when private sector employers and their contractors have historically been denied the same
The Post Office Limited (POL) has been issued a £104,441,881 bill, relating to non-compliance under the off-payroll working rules and how the body engaged freelancers and contractors.
What’s happened to freelancer Postman Pat?
In response to the HMRC investigation, the Post Office has said in a report that it has taken steps to prevent IR35-related mistakes.
But in the midst of this, have contractors been pushed out?
“Post Office has taken action to amend our policy and approach regarding IR35, undertaking exercises to reassess all contractors, and since being under new leadership, many contractors have left the business,” the spokesperson confirmed to Computer Weekly.
Who is footing the Post Office’s IR35 bill?
As to the large IR35 bill, this liability is to be subsidised by the Department for Business and Trade (DBT), a new document on the government website outlines, because the Post Office is “not in a position to fund it.”
Published on 29th January 2026, the information (here) indicates that the Subsidy Advice Unit (SAU) has accepted a request for a report providing advice to the DBT concerning its proposed subsidy to the Post Office. This includes its handling of the Horizon IT system, along with IR35 compliance. It states:
In relation to IR35, DBT intends to provide funding of up to £104,441,881 to HMRC to cover POL’s historic IR35 tax liability (and associated corporation tax) with the aim of protecting the post office network, as POL is not in a position to fund it.
In POL’s 2023/24 annual report, a £72m provision had been made, following HMRC’s review into the organisation’s classification of contractors it engaged. The 2024/25 accounts state that a £101m provision had been made and expect the matter to be settled in 2025/26.
Other public sector bodies – from Defra to the Ministry of Justice, Home Office and Department for Work and Pensions – have disclosed tax liabilities relating to non-compliance in recent years, totalling well over £200m.
Seb Maley, CEO of contractor insurer Qdos, said,
This is an astonishing amount – figures that you associate with football transfers, not necessarily IR35. It could easily be the biggest liability issued to any organisation as a result of mismanaging IR35 and the off-payroll rules.
IR35’s “systemic failure”
Maley suggested this latest development raises an important question: how have so many public sector bodies got IR35 so wrong?
“The legislation itself is known for its complexity, but to engage huge numbers of contractors under the wrong employment status is a sign of systematic failure,” said Maley.
He continued,
You are left to wonder if IR35 assessments were carried out. If so, how detailed were they? Was HMRC’s Check Employment Status for Tax – CEST – tool used? And if that’s the case, should businesses rely on it to determine IR35 status? The answer to the final question, in my opinion, is no.
While in many respects, government-owned bodies have a get out of jail free card when it comes to IR35, private sector firms don’t. The sheer sums involved here are a timely reminder of exactly why complying with these rules is so important.
Taxpayers ultimately pay these IR35 bills
Maley told The Freelance Informer (FI), “Given the Department for Business and Trade is also a government body, it’s ultimately funded by taxpayers. But in many ways, this is wooden dollars – money being paid from one public sector organisation to another. It goes without saying that this isn’t the case in the private sector.”
However, will contractors be footing large bills, too? And how far back does this go?
Maley responded to the FI, “The Post Office’s annual report for 2024/25 refers to ‘historical inaccuracies’ which infers that this relates to several years – if not since the off-payroll rules were introduced in the public sector in 2017. The sheer size of the bill also suggests that it dates back some years.
He continued,
Contractors themselves won’t be footing large tax bills, given the liability rests with the Post Office. Following the reform, contractors only carry the can financially when they are engaged by a small business.
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