UK Cabinet Office takes £7.8M hit to kill off recruitment system

The UK Cabinet Office has abandoned a recruitment platform, incurring a £7.8 million loss, while facing a potential £8.9 million penalty over its treatment of contractors' tax status. The Civil Service Jobs Applicant Tracking System (ATS) Programme, intended to create a unified hiring system across departments, was shut down to align with the Shared Services for Government Strategy managed by the Prime Minister's department.

This decision resulted in a £7.8 million loss. The program's discontinuation allows for a new project better aligned with the shared services strategy. However, the Cabinet Office did not promptly address the need for a reset, leading to challenges in exploring alternative ATS delivery options. The ATS program saw a reset in October 2025, estimated to cost £26 million to £38 million.

The Cabinet Office is liable for £38.5 million in unpaid tax and National Insurance under IR35 off-payroll working rules, with £15 million paid toward a settlement in February 2026, leaving a £23.5 million provision. The department also disclosed potential HMRC penalties of up to £8.9 million, though it considers payment unlikely due to the possibility of suspending penalties under compliance conditions.

Dave Chaplin, CEO of IR35 tax compliance firm IR35 Shield, highlighted the gravity of the HMRC assessment, emphasizing that claiming reasonable care is not equivalent to demonstrating it. IR35 determinations must be backed by robust processes, accurate information, and evidence of proper application.