UK Cabinet Office writes off £7.8M recruitment platform, faces £8.9M IR35 penalty risk

Recruitment platform written off

The UK Cabinet Office has closed its Civil Service Jobs Applicant Tracking System (ATS) Programme, recording a "constructive loss" of £7.8 million in its annual report for 2025-26. The programme was a central government plan for a unified, cross-departmental hiring system, and the report said it was being scrapped to "align with the Shared Services for Government Strategy," which the Prime Minister's department also manages.

A National Audit Office report published in March said the ATS was an example of an interdependency that has not been effectively managed within the Shared Services Strategy, which is designed to bring Whitehall departments onto a common set of software-as-a-service enterprise applications. According to the annual report, the programme consistently identified a lack of adoption from shared services clusters as a risk. Between 2023 and 2025, some clusters raised concerns and stated they would prefer to use the ATS functionality of their own ERPs rather than the new central platform. Despite this, the Cabinet Office did not assess the need for a reset as soon as it could have, making it challenging to consider alternative options. The programme was reset in October 2025, when the Cabinet Office estimated total reset costs of £26 million to £38 million.

IR35 liability and potential fine

The same report estimates the department's liability for unpaid tax and National Insurance under the IR35 off-payroll working rules, including interest, at £38.5 million. The rules affect many tech contractors working through their own companies. The Cabinet Office paid £15 million toward settlement in February 2026, leaving a £23.5 million provision at year-end, with the final settlement still under negotiation.

The department also disclosed a remote contingent liability for potential HMRC penalties of up to £8.9 million relating to historic IR35 compliance. In October 2025, HMRC concluded that the department's historic processes were inadequate and that reasonable care was not taken, which can attract a penalty of 15 to 30 percent against the net tax liability before interest. The report said the department considers payment unlikely because penalties can be suspended subject to compliance conditions.

Compliance lessons

Dave Chaplin, CEO of IR35 tax compliance firm IR35 Shield, said the HMRC assessment raises serious questions about compliance at the very heart of government. He said the lesson for every organization engaging contractors is that claiming to take reasonable care is not the same as being able to demonstrate it. IR35 determinations must be supported by robust processes, accurate information and evidence that the rules have been applied properly, he added, noting that getting it wrong can have consequences far beyond the original tax bill.

Sources: Theregister