UK Cabinet Office faces £38.5m tax liability and recruitment system loss

The UK Cabinet Office has disclosed significant financial losses and liabilities in its 2025-26 annual report. The department has set aside £38.5 million to cover unpaid tax and National Insurance related to the IR35 off-payroll working rules. This follows a finding by HM Revenue and Customs (HMRC) that the department failed to take reasonable care in determining the tax status of its contractors, with historic processes described as “inadequate.” The total liability, including interest, is estimated at £38.467 million, which includes a potential penalty of up to £8.9 million.

Additionally, the Cabinet Office reported a £7.8 million constructive loss after scrapping the Civil Service Jobs Applicant Tracking System (ATS) Programme. The program, intended to create a unified cross-departmental hiring system, was closed to align with the Shared Services for Government Strategy. The department noted that the program faced risks due to a lack of adoption from shared services clusters, which preferred using their own enterprise resource planning systems over the central platform.