The Ministry of Defence has been fined due to procedural failings.
The Ministry of Defence was fined £31,6m as it “had not appropriately sought nor gained necessary approval from HM-Treasury prior to the placement of some contracts”. The Ministry of Defence was also fined £1 million for failing to seek assurances that high-paid off-payroll appointees had arrangements in place to pay income tax and national insurance.
The information came to light when clarification was sought over an entry in the Department’s Annual Report and Accounts 2013 to 2014.
“With reference to page 109 of his Department’s Annual Report and Accounts 2013 to 2014 and page 17 of his Department’s Annual Report and Accounts 2014 to 2015, if for what reasons his Department was fined (a) £31.6 million and (b) £1 million by HM Treasury.”
Jeremy Quin, Minister for Defence Procurement, responded:
“ARAc 2013-14 – £31.6 million Fine from HMT
There were no fines of this value reported in the MOD ARAc 2013-2014 publication. A fine of this amount however was reported in the MOD ARAc for 2015-16 and it is this entry that we assume is being referenced in the question.
This fine related to instances where the Department had not appropriately sought nor gained necessary approval from HM-Treasury prior to the placement of some contracts. As a result of this procedural failure, HM Treasury imposed a £31.6million fine upon the Department. The Department undertook extensive action to address the procedural weaknesses, no further fines of this nature have been imposed upon Defence in the subsequent years.
ARAc 2014-15 – £1 million Fine from HMT
This HM Treasury fine was imposed for failures by the Department to seek assurance from a number of high-paid off-payroll appointees that they were paying the correct tax and National Insurance. This relates to procedural failures to seek assurance as part of the onboarding process for off-payroll staff to confirm the arrangements in place for those individuals to pay income tax and national insurance. The Department has implemented revised processes for the management of off-payroll employees including the new responsibilities placed on employers by changes to IR35 legislation. As a result, no further fines of this type have been imposed since.”