# UK Government Expands IR35 Contractor Scope

The UK Foreign, Commonwealth and Development Office (FCDO) has increased the number of IT contractors classified as in-scope under the IR35 tax rules from 243 in fiscal year 2024-25 to 441 in 2025-26. This expansion reflects ongoing challenges within UK government departments to fully comply with IR35 regulations, which govern tax treatment of contractors. The difficulties raise risks of significant backdated tax liabilities for both contractors and government agencies, emphasizing the need for enhanced compliance processes and contractor classification accuracy.

- Government procurement teams should prioritize rigorous contractor status assessments to mitigate exposure to retrospective tax liabilities under IR35.
- Contractors working with UK government agencies, especially in IT roles, face increased scrutiny and potential tax obligations, impacting contract negotiations and pricing.
- Agencies may need to invest in improved compliance frameworks and training to align with HMRC expectations and reduce audit risks.
- Industry stakeholders should monitor evolving IR35 enforcement trends to adjust contracting strategies and ensure alignment with government tax policies.

**Jurisdictions:** federal
**Industries:** Information Technology
**Topics:** Regulatory Compliance
**Published:** September 15, 2026

### Government Entities
- Foreign, Commonwealth and Development Office (FCDO)
- His Majesty's Revenue & Customs (HMRC)
- Public Accounts Committee
- Post Office

### Key Quotes
> Businesses are expected to get IR35 right and face potentially significant tax bills when they don’t. The Government should expect no lower standard from its own departments.
> — Dave Chaplin, CEO of IR35 Shield

### Sources
- [Gov.uk still struggling with IT contractor tax rules](https://www.theregister.com/public-sector/2026/09/15/govuk-still-struggling-with-it-contractor-tax-rules/5296531) - The Register