Tripod Partners, a UK health and social care recruitment firm has been ordered to pay £36,826.65 to a social worker after it had made unlawful wage deductions involving Employers National Insurance Contributions.

Tripod had placed the social worker with the UK’s Home Office to carry out age assessments for them on young people arriving in the UK unlawfully, at a reception centre in Kent. The social worker first worked for Tripod outside IR35 and through umbrella companies. She then changed to a personal service company.

In the tribunal judgment, it states that the Home Office assessed the worker on the HMRC tool CEST (Check Employment Status for Tax). It decided that she fell within IR35 and so should be taxed as if an employee. Tripod then deducted from the £58 an hour pay she was to be paid for her work.

The tribunal ruled that the social worker should be classified as a worker and that Tripod unlawfully deducted the employer’s National Insurance (NI) contributions from her wages. The judge found that the contract did not authorise such deductions, there was no statutory requirement to do so, and the worker had not given written consent.

The social worker said the National Insurance deduction was an unauthorised deduction contrary to S13 of the Employment Rights Act 1996.

Although the claimant’s case is not part of a multiple claim, it noted that the ruling has wider implications as the practice of deducting employer’s NI contributions appears to be company-wide.

IR35 tax compliance firm IR35 Shield said Tripod may face mounting claims from contractors who had taxes unlawfully deducted due to a failure to properly implement the new Off-payroll (IR35) working rules.

Dave Chaplin, CEO of IR35 Shield, suggests that the tribunal decision demonstrates the difficulty of navigating the legislation for all parties and the tribunal, and it is possible that the ruling could be challenged.

Chaplin said in a press release, “The status decision was made in June 2021; therefore, the rules around Status Determination Statements (SDS) would be in play. While the ruling found that a determination was made, there was no finding that an SDS was given to either the worker or the agency. If the SDS had not been given, the Home Office would remain liable for the tax, not the agency.”

“The ruling indicated that ’The Respondent accepts that is the deemed employer because of the IR35 decision’, but that’s not how the legislation operates. The agency only becomes the deemed employer if the SDS is given to both the agency and the worker, not just because the decision was made. It’s possible that the agency was never authorised to make any deductions, leaving the Home Office liable for the tax.”

“A surprising argument was put forward by the respondent, who sought to rely on the tax calculations under the old IR35 rules (Chapter 8 ITEPA), which were not applicable in this instance since the newer rules (Chapter 10 ITEPA) applied,” Chaplin continued. “One of the key differences under the newer rules is that payments to the limited company must be treated as employment income, which means employers’ NI cannot be deducted.”

“Depending on the full facts presented to the tribunal, which won’t be in the decision, the Judge may have erroneously concluded that the agency was the ‘deemed employer’ instead of the Home Office. If that’s the case, none of the deductions made by the agency would have been lawful, and the Home Office may be facing a very large tax bill,” Chaplin added.

In its conclusions, the Judge found that the worker is entitled to the protection of the Employment Rights Act 1996 relevant to workers, including S13.

SIA reached out to Tripod for comment.