The Welsh Government has been forced to finance a £19m payment made by environmental regulator Natural Resources Wales to HMRC following a probe into taxes paid by its outsourced contractors. The payment has been made as part of an ongoing investigation by the 海角视频 tax authority.
The Welsh Government hope the amount, with accrued interest, will be the end of the matter, but there is no guarantee this will be the case. There is little likelihood of it being reduced.
NRW, which is the Welsh Government’s largest sponsored body, has confirmed in its is latest published accounts for 2023-24 laid before the Senedd, of the investigation into its compliance with off-payroll working (more commonly known as IR35) requirements, and the extent of the potential liability that maybe owed.
The additional payment of £19m from the Welsh Government for the HMRC payment was received by NRW in advance back in March. Any underpayment of tax from a contractor is a matter for the employer.
Whatever the final settlement the liability will be a matter for NRW. The Welsh Government could potentially reduce its grant aid to NRW over a number of years. Income generated by NRW from fines and licences could also be used.
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NRW, which is currently looking to reduce its head count by more than 200 as it faces budgetary challenges, was not in a financial position to make the payment to HMRC.
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Deputy First Minister and Cabinet Secretary for Climate Change and Rural Affairs, Huw Irranca-Davies, said; “NRW and HMRC are continuing to discuss this matter in order to bring about a resolution. The Welsh Government will continue to work with NRW and provide the necessary support as it goes through this process.
“Since becoming aware of the matter, the Welsh Government has increased its engagement with NRW to track and monitor its progress in resolving the issue and to learn lessons from how the position came about.
“I have asked my officials to work with NRW to develop enhanced monitoring arrangements to provide assurance and confidence in the oversight and financial and risk management arrangements in place. I have also asked the chair of NRW to take a number of steps to further enhance capacity and capability within NRW.
"There is no doubt that the professional and passionate staff within NRW work hard every day to help to protect our environment and the health and wellbeing of people in Wales. The Welsh Government continues to support NRW in undertaking their crucial role and to hold them to account in that delivery.”
In its accounts NRW say: "We have received HMRC’s opinion on a potential liability in relation to IR35 and contractors which we have responded to. A liability may materialise and a wide range of values are possible. However, during the financial year, without any admission of liability, NRW has made a without prejudice payment on account to HMRC of £19m.
"This is in respect of any prospective PAYE income tax, NIC and apprenticeship levy or any other liability NRW may have to HMRC. This also includes interest that may be payable by NRW to HMRC at the conclusion of its enquiry and/or any appeals or settlement. The payment on account is included within note 12 to the accounts.
“We expect discussions to be ongoing at the time the annual accounts are signed, therefore an unquantified contingent liability is disclosed.”
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James Evans MS, Welsh Conservative Shadow Rural Affairs Minister, said: “It is deeply troubling that Natural Resources Wales has been under investigation by HMRC. What concerns me now is that the organisation will face a large tax bill that will require the Government to once again, whip out the taxpayer’s cheque book to bail them out.
“With NRW’s inability to carry out its responsibilities or balance their own books this is another serious example as to why the organisation should be broken up”