Post Office Limited is set to receive more than £104 million in taxpayer support after being hit with a substantial bill for historic non-compliance with off-payroll working rules, commonly known as IR35.
A newly published 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 that the Post Office is “not in a position to fund it” itself.
The disclosure, published on 29 January 2026, appears in a notice from the Subsidy Advice Unit, which has accepted a request to advise on the legality and proportionality of the proposed subsidy. The document confirms that the support relates to the Post Office’s historic handling of contractors under the off-payroll working regime, alongside other legacy issues including those linked to the Horizon IT system.
The scale of the liability has grown significantly over time. In its 2023/24 annual report, the Post Office made a £72 million provision following an HMRC review into how it had classified contractors and freelancers. That provision increased to £101 million in its 2024/25 accounts, with the organisation stating it expected the matter to be settled during the 2025/26 financial year.
The Post Office is not alone in facing large IR35-related tax bills. In recent years, several major public sector bodies, including Defra, the Ministry of Justice, the Home Office and the Department for Work and Pensions, have disclosed liabilities linked to off-payroll non-compliance, with combined totals running well beyond £200 million.
Seb Maley, chief executive of IR35 specialist Qdos, described the Post Office bill as extraordinary. He said the figures were more commonly associated with football transfers than tax compliance failures and suggested it could be the largest IR35 liability ever issued to a single organisation.
Maley questioned how such widespread misclassification could occur across public bodies, pointing to 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-owned organisations can ultimately rely on Treasury support when liabilities emerge, Maley warned that private sector firms do not have the same safety net. He said the Post Office case should act as a stark reminder to businesses of the financial risks associated with getting IR35 wrong.
