Post Office Limited is set to receive more than £104 million in taxpayers’ money after the company was slapped with a significant bill for historic non-compliance with non-payroll working rules, commonly known as IR35.
A newly released government document confirms that the Department for Business and Trade will provide up to £104,441,881 to cover the Post Office’s outstanding tax liability to HM Revenue & Customs. The funding will be paid directly to HMRC after officials concluded the Post Office was “unable to fund itself”.
The disclosure, published on January 29, 2026, appears in a notice from the Subsidy Advice Unit, which accepted a request for advice on the legality and proportionality of the proposed subsidy. The document confirms that the support relates to the Post Office’s historical dealings with contractors under the off-payroll work arrangement, along with other legacy issues, including those relating to the Horizon IT system.
The extent of liability has grown significantly over time. In its 2023/24 annual report, the Post Office made a £72 million provision after HMRC reviewed how it classified contractors and freelancers. This provision increased to £101m in the 2024/25 financial statements, with the organization saying it expected the matter to be resolved during the 2025/26 financial year.
The Post Office is not the only one facing high tax bills related to IR35. In recent years, several major public bodies, including Defra, the Ministry of Justice, the Home Office and the Department for Work and Pensions, have disclosed liabilities relating to payroll non-compliance, with the total amounting to well over £200 million.
Seb Maley, managing director of IR35 specialist Qdos, described the Post Office’s bill as extraordinary. He said the figures were more likely to be linked to football transfers than tax compliance breaches and suggested it could be the largest IR35 liability ever imposed on a single organisation.
Maley questioned how such widespread misclassification could occur in public institutions, citing what he described as a systemic failure in assessing employment status. He said the case raised serious doubts about whether proper IR35 assessments had been carried out and warned against over-reliance on HMRC’s Check Employment Status for Tax (CEST) tool.
While government organizations can ultimately rely on Treasury Department support when liabilities arise, Maley warned that private sector companies do not have the same safety net. He said the Post case should serve as a stark reminder to businesses of the financial risks associated with incorrect IR35 declarations.
