Corporate report

HMPPS Annual Reports and Accounts 2025 to 26: Financial Statements

Published 29 October 2026

Applies to England and Wales

Financial statements

Statement of Comprehensive Net Expenditure (SoCNE)

For the period ended 31 March 2026

			2025 to 26		2024 to 25
	Notes	£’000	£’000	£’000	£’000
Income from contracts with customers	3a	(249,027)		(256,298)
Other operating income	3b	(39,639)		(45,752)
Total operating income			(288,666)		(302,050)
Staff costs	4a	3,735,623		3,479,323
Purchase of goods and services	4b	2,936,188		2,800,810
Depreciation, amortisation and impairment charges	4c	500,101		728,545
Other non‑cash expenditure	4d	568,035		492,688
Total operating expenditure			7,739,947		7,501,366
Net operating expenditure			7,451,281		7,199,316
Finance expense	4e	34,938		33,654
Net expenditure for the year			7,486,219		7,232,970

Other Comprehensive Expenditure

For the period ended 31 March 2026

		2025 to 26	2024 to 25
Items which will not be reclassified to net operating expenditure:	Notes	£’000	£’000
Net (gain)/loss on revaluation of property, plant and equipment	5	(356,654)	(54,684)
Net (gain)/loss on revaluation of intangible assets	6	(35)	(262)
Net (gain)/loss on revaluation of right of use assets	7	362	3,084
Net (gain)/loss on revaluation of assets held for sale	8	2,228	579
Remeasurement of net pension liabilities (gain)/loss	18	(359,083)	(12,797)
Total comprehensive expenditure		6,773,037	7,168,890

The notes form part of these accounts.

Statement of Financial Position (SoFP)

At 31 March 2026

			31 March 2026		31 March 2025
	Notes	£’000	£’000	£’000	£’000
Non‑current assets
Property, plant and equipment	5	13,420,509		11,699,975
Intangible assets	6	96,214		81,977
Right of use assets	7	119,770		120,444
Investments		320		251
Total non‑current assets			13,636,813		11,902,647
Current assets
Assets held for sale	8	5,244		9,898
Inventories	9	62,147		70,463
Trade and other receivables	10	127,668		133,045
Cash and cash equivalents	11	56,730		59,201
Total current assets			251,789		272,607
Total assets			13,888,602		12,175,254
Current liabilities
Trade and other payables	12a	(1,056,479)		(900,840)
Financial liabilities	14b	(19,314)		(20,911)
Lease liabilities	7ii	(23,854)		(22,563)
Provisions	13	(29,683)		(26,122)
Total current liabilities			(1,129,330)		(970,436)
Non‑current assets less net current liabilities			12,759,272		11,204,818
Non‑current liabilities
Trade and other payables	12b	(197)		(238)
Financial liabilities	14b	(108,442)		(127,755)
Lease liabilities	7ii	(105,996)		(112,112)
Provisions	13	(188,861)		(184,727)
Pension deficit	18b	(23,850)		(472,245)
Total non‑current liabilities			(427,346)		(897,077)
Assets less liabilities			12,331,926		10,307,741
Taxpayers’ equity
General Fund			8,706,519		6,910,612
Revaluation Reserve			3,625,407		3,397,129
Total taxpayers’ equity			12,331,926		10,307,741

The notes form part of these accounts.

James McEwen
Chief Executive Officer
26 October 2026

Statement of Cash Flows (SoCF)

For the period ended 31 March 2026

			2025 to 26		2024 to 25
	Notes	£’000	£’000	£’000	£’000
Cash flows from operating activities
Net expenditure		(7,486,219)		(7,232,970)
Adjustments for non‑cash transactions		1,113,003		1,254,166
Adjustment for intradepartmental settlements and asset transfers with the MoJ		284,211		293,320
Adjustment for finance costs	4e	10,633		9,826
Adjustment for pension contributions paid less service costs	18	(113,366)		(68,531)
(Increase)/decrease in trade and other receivables	10	5,377		30,684
Less: Impairments in trade and other receivables	4c	655		(1,009)
(Increase)/decrease in inventories	9	8,316		(6,841)
Increase/(decrease) in trade and other payables	12a	155,639		59,680
Increase/(decrease) in capital payables		(84,916)		(33,888)
Less: Payments of amounts due to the Consolidated Fund to the MoJ		–		–
Utilisation of provisions	13	(32,123)		(35,697)
Net cash outflow from operating activities			(6,138,790)		(5,731,260)
Cash flows from investing activities
Purchase of property, plant and equipment	5	(1,745,422)		(1,204,328)
Purchase of intangibles	6	(11,573)		(11,361)
Proceeds on disposal of property, plant and equipment		592		187
Proceeds on disposal of assets held for sale		2,821		7,154
Proceeds on disposal of investments		–		–
Net cash outflow from investing activities			(1,753,582)		(1,208,348)
Cash flows from financing activities
Net funding received from the MoJ		7,945,000		6,997,500
Payments of amounts due to the Consolidated Fund to the MoJ		–		–
Repayments of local authority loans	12b	(41)		(43)
Capital element of payments in respect of finance leases and on‑balance sheet (SoFP) private finance initiative contracts		(20,910)		(23,535)
Repayment of IFRS 16 lease liabilities	7	(23,515)		(26,595)
Interest paid		(10,633)		(9,826)
Net financing			7,889,901		6,937,501
Net increase/(decrease) in cash and cash equivalents in the period			(2,471)		(2,107)
Cash and cash equivalents at the beginning of the period	11	59,201		61,308
Cash and cash equivalents at the end of the period	11	56,730		59,201
Increase/(decrease) in cash and cash equivalents			(2,471)		(2,107)

The notes form part of these accounts.

Statement of Changes in Taxpayers’ Equity (SoCTE)

For the period ended 31 March 2026

		General Fund	Revaluation Reserve	Total Reserves
	Notes	£’000	£’000	£’000
Balance at 1 April 2024		6,323,951	3,422,160	9,746,111
Changes in taxpayers’ equity for 2024-25
Net expenditure for the year to 31 March 2025		(7,232,970)	–	(7,232,970)
Net gain/(loss) on revaluation of:
Property, plant and equipment		–	54,684	54,684
Intangible assets		–	262	262
Right of use assets		–	(3,084)	(3,084)
Assets held for sale		–	(579)	(579)
Release of reserves to the General Fund		76,314	(76,314)	–
Remeasurement of net pension liabilities	18	12,797	–	12,797
Funding from the MoJ		6,997,500	–	6,997,500
Settlement of transactions with the MoJ		260,564	–	260,564
Notional items:
Auditor’s remuneration	4d	450	–	450
Notional element of MoJ overhead recharges		472,006	–	472,006
Balance at 31 March 2025		6,910,612	3,397,129	10,307,741
Changes in taxpayers’ equity for 2025 to 26
Net expenditure for the year to 31 March 2026		(7,486,219)	–	(7,486,219)
Net gain/(loss) on revaluation of:
Property, plant and equipment		–	356,654	356,654
Intangible assets		–	35	35
Right of use assets		–	(362)	(362)
Assets held for sale		–	(2,228)	(2,228)
Release of reserves to the General Fund		125,821	(125,821)	–
Remeasurement of net pension liabilities	18	359,083	–	359,083
Funding from the MoJ		7,945,000	–	7,945,000
Settlement of transactions with the MoJ		301,632	–	301,632
Notional items:
Auditor’s remuneration	4d	520	–	520
Notional element of MoJ overhead recharges		550,070	–	550,070
Balance at 31 March 2026		8,706,519	3,625,407	12,331,926

The notes form part of these accounts.

Notes to the accounts

1. Statement of accounting policies

1.1 Basis of preparation

The accounts have been prepared in accordance with the Government Financial Reporting Manual (FReM) 2025 to 26 issued by HM Treasury. The accounting policies contained in the FReM follow International Financial Reporting Standards (IFRS) as adapted or interpreted for the public sector context.

Where the FReM permits a choice of accounting policy, the policy which has been judged to be the most appropriate to the particular circumstances of HMPPS for the purpose of giving a true and fair view has been selected. The particular accounting policies adopted by HMPPS are described below. They have been applied consistently in dealing with items that are considered material to the accounts.

The functional and presentational currency of HMPPS is the British pound sterling (£).

1.2 Accounting convention

These accounts have been prepared on an accruals basis under the historical cost convention, modified to account for the revaluation of non‑current assets, assets held for sale, inventories and financial assets, where material.

1.3 Changes in accounting policy and disclosures

a) Changes in accounting policies and new and amended standards adopted

IFRS 17 Insurance Contracts replaced IFRS 4 Insurance Contracts and was included in the FReM for mandatory implementation from 2025‑26. It establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of this standard. It requires all insurance contract liabilities within scope to be calculated as the present value of future insurance cash flows with a provision for risk and held as liabilities on the SoFP. Through a process of review we have assessed that HMPPS has not issued any contracts falling within scope of the standard per HM Treasury guidance and there is therefore no impact on the accounts.

Update on valuation of assets resulting from FReM changes

The FReM 2025‑26 includes additional updated guidance on valuations of property, plant and equipment. Physical inspections of land and buildings by an expert valuer continue to be conducted on a rolling quinquennial cycle (every five years). However, the requirement for professional desktop valuations in the intervening years has been removed and as per the FReM 2025‑26, the residual estate is now indexed in house. Details of the indexation applied can be found in section 1.9.

b) New standards, amendments and interpretations issued, but not effective, for the financial year beginning 1 April 2025, and not adopted early

IFRS 18 Presentation and Disclosure in Financial Statements will change the way HMPPS presents the SoCNE. The full impact of this new standard on HMPPS will not be determined until it has been adopted for use in the public sector by the FReM. It is expected to be implemented in the public sector from 1 April 2028.

HMPPS does not consider that any other new or revised standard or interpretation will have a material impact.

c) Changes in presentation and reclassifications

There have been no changes to presentation or reclassifications in 2025‑26.

1.4 Going concern

HMPPS is an executive agency of the MoJ. The future financing of HMPPS’ activities is expected to be met by the MoJ from supply funding, which is voted annually under the relevant Appropriation Act.

1.5 Operating income

Operating income is generated directly from the operating activities of HMPPS and is recognised as revenue in the SoCNE in accordance with IFRS 15. Revenue is recognised when a performance obligation included within an agreement with a customer is satisfied, at the transaction price allocated to that performance obligation.

A large proportion of operating income relates to grant funding from the European Social Fund (ESF), and the recharge of expenditure to other government departments, particularly healthcare funding.

Grant funding from the ESF is recognised in accordance with IAS 20 Accounting for Government Grants and Disclosure of Government Assistance on a systematic basis over the period in which the related eligible expenditure is incurred. ESF grants are presented using the gross method in accordance with IAS 20, with income disclosed under other operating income in Note 3. The funding is subject to conditions including delivery of agreed outputs, timely submission of claims, and compliance with funding rules. Non‑compliance may result in clawback or the withholding of future funds.

Healthcare funding is recognised on an accruals basis. Establishments log healthcare activity (medical escorts and bedwatches), which is used as the basis for raising invoices with standard 30‑day payment terms.

The recharge of expenditure for provision of immigration detention is also recognised on an accruals basis. The cost of provision is recharged under a service level agreement, whereby the costs are recharged based on management accounts information and an agreed rate for each prison bed used in the year.

Another significant element of operating income comes from retail sales in prison shops, where the income is recognised on the exchange of goods.

Operating income is stated net of VAT. Further information can be found in Note 3.

Supply funding drawn down from the department is treated as financing and credited directly to the General Fund on a cash basis, in accordance with the FReM.

1.6 Purchases of goods and services

Purchases of goods and services are recognised on an accruals basis. Accrued expenditure is recognised when HMPPS has an unconditional obligation to pay customers, and is based on agreed amounts, contractually or by another form of mutual agreement.

1.7 Staff costs

Staff costs are recognised as expenses on an accruals basis when HMPPS has an unconditional contractual obligation to pay them.

1.8 Notional costs

Notional costs comprise statutory auditors’ remuneration, which represents the National Audit Office’s cost for the audit of HMPPS’ accounts, and notional costs for HMPPS’ usage of corporate services provided by the MoJ. Such notional costs are credited directly to the General Fund. The majority of the notional recharge costs relate to IT services, HR services, estates costs, and shared services processing charges that are centrally managed by the department on behalf of HMPPS.

1.9 Property, plant and equipment, and intangible assets

Initial recognition and capitalisation threshold

Property, plant and equipment and intangible assets, including subsequent expenditure on existing assets, are initially recognised at cost, representing the costs directly attributable to acquiring or constructing the asset and bringing it to the location and condition necessary for it to be capable of operating in the manner intended by management. The threshold for capitalising individual assets is £10,000 (including irrecoverable VAT).

Significant purchases of assets which are separately beneath the capitalisation threshold, in connection with a single project, are treated as a grouped asset, with a capitalisation threshold of £1 million (including irrecoverable VAT).

Where an item costs less than the prescribed limit but forms an integral part of a package whose total value is greater than the capitalisation level, then the item is capitalised.

Where a large asset, for example a building, includes a number of components with significantly different asset lives, such as plant and equipment, then these components are treated as separate assets and depreciated over their own useful lives.

Subsequent expenditure

Subsequent expenditure to enhance an item of property, plant and equipment is recognised as an increase in the carrying amount of the asset when it is probable that additional future economic benefits or service potential deriving from the cost incurred to replace a component of this item will flow to the enterprise and the cost of the item can be determined reliably. Where a component of an asset is replaced, the cost of the replacement is capitalised if it meets the criteria for recognition above. The carrying amount of the part replaced is de‑recognised. For buildings valued under depreciated replacement cost (DRC) by the Valuation Office Agency (VOA) the full amount of additional capital expenditure exceeding the minimum threshold of £1 million per project is added to the current DRC value of the asset on go live, to be included for indexation and assessed by the VOA at the next physical valuation. The £1 million threshold does not apply to the smaller existing use value (EUV) properties, where all capital expenditure is added to the value of the asset once completed and in use. Where over £10 million of capital expenditure has been made live in a year that any property is not physically valued, that asset will be prioritised for physical inspection in the following valuation year, even when the quinquennial valuation is not yet due. As a result more than the 20% of the estate prescribed by the FReM quinquennial valuation requirement is professionally inspected each year.

Other expenditure that does not generate additional future economic benefits or service potential, such as repairs and maintenance, is charged to the SoCNE during the financial year in which it is incurred.

Intangible assets are recognised if it is probable that future service potential will flow to HMPPS and the cost can be measured reliably. Intangible assets comprise software developed by third parties, including the MoJ, and software licences.

Assets under construction

Assets under construction are valued at historic cost within property, plant and equipment and intangible assets. The assets are not subject to depreciation or amortisation until completion, when the carrying value is transferred to the respective asset category. Expenditure is capitalised where it is directly attributable to bringing an asset into working condition, such as external consultant costs, relevant employee costs and an appropriate portion of relevant overheads.

Subsequent valuation

Subsequent to initial recognition, property, plant and equipment are carried at current value.

Land and buildings (including dwellings) are recorded at current value, as interpreted by the FReM, on the basis of professional valuations, which are conducted for each property at least once every five years. Full professional valuations are undertaken by the Valuation Office Agency, an independent body, using Royal Institution of Chartered Surveyors (RICS) Valuation – Professional Standards, known as the Red Book.

Freehold prison buildings and secure training centres are classified as specialised buildings which cannot be sold on the open market.

Specialised properties are valued and carried at DRC to a modern equivalent basis in accordance with the Red Book, adjusted for functional obsolescence.

Land associated with buildings valued to DRC has been assessed to current value, interpreted as EUV, having regard to the cost of purchasing a notional replacement site in the same locality, equally suitable for the existing use and of the same size, with normally the same physical and locational characteristics as the actual site, other than characteristics of the actual site that are irrelevant, or of no value, to the existing use. Where the use is too specialised to categorise in market terms, regard has been had to the range of uses prevailing in the locality of the actual site.

In between full valuations, carrying values are adjusted through indices or desktop valuations to ensure they are not materially different from those that would be determined at the end of the reporting period.

For buildings, the index applied is the Building Cost Information Service (BCIS) construction data Tender Price Index (TPI) that reflects price changes in the construction sector and is a good indicator of price pressure in building contracts in the UK. Furthermore, location factors are applied reflecting movements in the local property markets and a reduction in remaining life is reflected. For EUV buildings a new Commercial Property Capital Price Index (CoPCaPI) has been created by the VOA for application by public sector bodies. This has been adopted by HMPPS for the EUV properties.

Due to lack of a suitable index available without undue cost or effort, the dispensation in section 10.1.3 of the FReM 2025‑26 to revalue the given assets using a quinquennial revaluation supplemented by a desktop revaluation in year three has been applied to land assets and no indexation has been applied to those not included in the physical inspections for 2025‑26.

Assets which were recently held for their service potential but are now surplus are valued at current value in existing use where there are restrictions on HMPPS or the asset, which would prevent access to the market at the reporting date. Otherwise, surplus assets are valued at fair value in accordance with IFRS 13 Fair Value Measurement.

In determining whether a non‑operational asset is surplus, HMPPS assesses whether there is a clear plan to bring the asset back into use as an operational asset. Where there is a clear plan, the asset is not considered as surplus and is maintained at current value in existing use.

Otherwise, the asset is assessed as being surplus and valued at fair value under IFRS 13 Fair Value Measurement.

Farms and surplus freehold land, prison officers’ quarters and some other non‑specialised buildings are carried at open market valuations.

Non‑property assets are recorded at cost on purchase and restated at each reporting date using the Producer Price Index published by the Office for National Statistics. Subsequent to initial recognition, intangible assets are recognised at fair value in accordance with IAS 38 Intangible Assets as adapted by the FreM.

As no active market exists for the intangible assets held by HMPPS, fair value is assessed as replacement cost less accumulated amortisation and impairment losses.

Intangible assets in service were re‑measured at the end of each reporting period using the Producer Price Index issued by the Office for National Statistics up until 31 March 2024. From 1 April 2024, all MoJ entities have been granted permission to early adopt the 2025‑26 FreM adaptation withdrawing the revaluation model for intangible assets. The carrying values at the transition date of 1 April 2024 are considered historical cost and will be amortised over the remaining lives of the assets.

Fair value hierarchy and inputs

The valuation technique applied to all fair value figures of surplus, non‑operational properties is the market approach in accordance with IFRS 13 Fair Value Measurement. It uses prices and other relevant information generated by market transactions involving identical or comparable (that is, similar) assets.

The inputs to this technique constitute level 2 inputs in each instance. Level 2 inputs are inputs that are observable for the asset, either directly or indirectly. The inputs used take the form of analysed and weighted market evidence such as sales, rentals and yields in respect of comparable properties in the same or similar locations at or around the valuation date.

For other property assets in continuing use, fair value is interpreted as market value or ‘value in use’. In the Red Book this is defined as “market value on the assumption that property is sold as part of the continuing enterprise in occupation”. The value in use of a non‑cash‑generating asset is the present value of the asset’s remaining service potential, which can be assumed to be at least equal to the cost of replacing that service potential.

Depreciated historical cost is used as a proxy for fair value for those assets with short useful lives or low values, as allowed by the FReM.

Estimation uncertainty

The valuation of HMPPS’ estate is inherently subjective due to, among other factors, build cost, functional obsolescence, changes in the TPI, prevailing market yields and comparable market transactions. As a result, the valuations HMPPS places on its estate are subject to a degree of uncertainty.

Depreciated replacement cost (DRC)

The starting point for any DRC is to establish the cost of the gross replacement cost, which is considered to fit the modern equivalent asset.

The costs used for the DRC valuations are costs relating to actual construction projects and as such are reliable and documented. Costs include VAT with the exception of private finance initiative (PFI) contracts which are delivered via a tax‑efficient route.

Adjustments are made to the costs in line with the RICS Red Book to exclude certain costs, such as contingencies, abnormal expenditure due to ground conditions and demolitions. These costs are readily identifiable in the cost data provided.

Fees shown in the costs provided relate to the main contractor’s and design fees with some fees included in individual work packages. As part of the valuation approach, additional professional fees, such as quantity surveyors, are added to the valuation. There is considered to be potential for a small reduction of up to 1% to 2% in the fee additions applied.

The other key starting point is the assignation of lives to the assets, where BCIS research and published data obtained through feedback from the construction industry have been used, to provide averaged assessments of typical component lives.

The Valuation Office Agency’s approach to depreciation takes a componentised approach to assign ages and remaining lives and reflect any changes incurred such as on capital expenditure, the level of maintenance, and applying physical obsolescence. The physical age of an asset is established through factual evidence and site inspection, and adjustments are made to ages to reflect renewal of components, with corresponding adjustments to component remaining lives.

The final stage of the valuation is the application of functional obsolescence. There is a degree of subjectivity around the application of functional obsolescence and a movement of 5% either way is considered reasonable.

Assumptions tested	Change	New valuation £m	Variance £m	Variance %
Actual total DRC buildings value 2026		8,672
Alternate scenarios:
Capital expenditure changes[footnote 1]	50%	8,912	240	2.8
Changes in TPI[footnote 2]	-2 points	8,630	(41)	(0.5)
Changes in TPI[footnote 2]	2 points	8,713	41	0.5
Physical depreciation[footnote 3]	-10%	8,707	35	0.4
Changes in functional obsolescence[footnote 4]	5%	8,648	(24)	(0.3)
Changes in functional obsolescence[footnote 4]	-5%	8,696	24	0.3
Changes in professional fees[footnote 5]	-1%	8,630	(41)	(0.5)

Land

Land associated with buildings valued to DRC has been assessed to current value, interpreted as EUV, having regard to the cost of purchasing a notional replacement site in the same locality. This land has been valued using the direct comparable approach. Available comparables might show a wide range depending on planning, use, size, density and location, and therefore require adjustment for these factors. These factors increase the level of valuer judgement involved.

The Valuation Office Agency has agreed with the MoJ for each site as to whether the actual site remains appropriate for the valuation.

In some circumstances, alternative sites would be appropriate and in these instances the land has been valued assuming the benefit of planning permission for development for a use, or a range of uses, prevailing in the vicinity of the selected site.

Having regard to 2019 RICS Guidance Note ‘Comparable Evidence in Real Estate Valuation’, due to a lack of direct land comparable for valuers to draw upon this year, greater regard was given to market reports and forecasts.

In terms of land evidence, the table below shows a sensitivity analysis on a land valuation (HMP Brinsford), extrapolated across the population.

Assumption tested	Assumption	HMP Brinsford £000	Extrapolated total £000
£/hectare	5%	33	56,115
£/hectare	-5%	(33)	(56,115)

A reasonable alternative assumption is to adjust the price per hectare (£/ha). The current value of the asset could be up to +5% higher (£33,000) or by -5% lower (-£33,000), which extrapolates to +/- £56.1 million across the total population. Given the level of valuer judgement involved in land valuations, which are subjective, and the current market conditions with a lack of transactions, we are unable to quantify the potential level of uncertainty.

Existing use value – buildings

For the HMPPS estate, the EUV basis of valuation is used to support those properties where there is market‑based evidence to support the use of EUV. This basis of valuation is typically used to value the land element of prisons, non‑specialist assets, married quarters, farms, land and non‑specialist approved premises and probation assets. As a market‑based assessment of value, EUV relies on the availability of comparable market evidence that is capable of analysis and appropriate application by the valuer, using the required assumptions embodied within EUV, to reliably inform the asset valuation being undertaken.

The table below shows sensitivity analysis on one of the EUV valuations provided (Clarks House Approved Premises), extrapolated across the EUV population.

Assumption tested	Assumption	Clarks House £000	Extrapolated valuation £000	Variance from base £000
Market yield (base)	6.50%	1,620	89,000	–
Market yield	6.25%	1,685	92,582	3,561
Market yield	6.75%	1,560	85,460	(3,561)

The UK investment market has experienced a significant rebasing over the past year, and in particular this has resulted in drops to the yields for regional offices. Assumptions are reviewed annually to ensure they remain appropriate.

Revaluation

Gains arising on revaluation are credited to the Revaluation Reserve and shown in Other Comprehensive Expenditure, unless they reverse a revaluation decrease on the same asset. Reversals are credited to the SoCNE to the extent of the previous amount expensed, and any excess is credited to the Revaluation Reserve.

When an asset’s carrying value decreases as a result of a permanent diminution in the value of the asset due to a clear consumption of economic benefit or service potential, the decrease is charged directly to operating expenditure in the SoCNE, with any remaining Revaluation Reserve balance released to the General Fund.

A revaluation decrease (other than as a result of a permanent diminution) is reversed against any existing amount held in the Revaluation Reserve in respect of that same asset, with any residual decrease taken to net operating costs in the SoCNE.

Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the SoCNE and depreciation based on the asset’s original cost is transferred from the Revaluation Reserve to the General Fund.

Depreciation and amortisation

Depreciation and amortisation are charged on a straight‑line basis at rates calculated to write off the value of assets less any estimated residual value evenly over their estimated useful lives. Useful lives are reviewed annually. Where a change to the life of an asset or asset category is determined, depreciation is charged on a straight‑line basis over the assessed remaining life. Depreciation commences in the month of acquisition for all non‑current assets.

If an asset comprises two or more significant components, with substantially different useful lives, then each component is treated separately for depreciation purposes and depreciated over its individual useful life. Estimated useful asset lives are within the following ranges:

Freehold land	Not depreciated
Freehold buildings including dwellings	Shorter of remaining life or up to 60 years (up to 55 years for dwellings) depending on building
Leasehold buildings including dwellings	Shorter of remaining life, remaining lease period or up to 50 years (up to 55 years for dwellings)
Information technology, plant and equipment, furniture, fixtures and fittings	3 to 15 years depending on individual asset type
Vehicles	5 to 15 years depending on individual asset type
Intangible assets – software	3 to 10 years
Intangible assets – licences	Length of the licence

1.10 Leases

Government bodies typically lease properties used for administrative purposes for reasons of efficiency and flexibility. HMPPS also benefits from the lease of land under leases with peppercorn consideration, which could not have been obtained through outright purchase. For other types of asset, HMPPS determines whether to lease or purchase based on value for money considerations, such as whether the underlying asset is required for its entire life or for a more limited period.

Scope and exclusions – HMPPS as lessee

In accordance with IFRS 16 Leases, contracts or parts of contracts that convey the right to control the use of an asset for a period of time are accounted for as leases.

As adapted by the FReM, IFRS 16 has been applied to leases with nil or nominal (that is, significantly below market value) consideration and arrangements for accommodation between government departments.

When making the above assessments, HMPPS excludes two types of leases. Firstly, those relating to low‑value items, which it considers as those where the underlying asset would have a cost of less than £10,000 when new, provided those items are not highly dependent on or integrated with other items. Secondly, contracts whose term is less than 12 months (comprising the non‑cancellable period together with any extension options HMPPS is reasonably certain to exercise and any termination options HMPPS is reasonably certain not to exercise).

Initial recognition – HMPPS as lessee

At the commencement of a lease (or on the date of transition to IFRS 16, if later), HMPPS recognises a right of use asset and a lease liability.

The lease liability is measured at the value of the remaining lease payments, discounted either by the interest rate implicit in the lease or, where this is not readily determinable, HMPPS’ incremental rate of borrowing. This rate is advised annually by HM Treasury (4.81% for leases recognised in 2025, and 5.32% for those in 2026). Where the lease includes extension or termination options, the lease payments will be for the non‑cancellable period together with any extension options HMPPS is reasonably certain to exercise and any termination options HMPPS is reasonably certain not to exercise.

In the event that a lease contract has expired, but HMPPS remains in occupation pending negotiations for a renewed term, the lease term has been measured as the estimated time until the new contract will be agreed.

The measurement of lease payments excludes any VAT payable, and irrecoverable VAT is expensed at the point it falls due in line with IFRIC 21 Levies.

The right of use asset is measured at the value of the lease liability, adjusted for: any lease payments made before the commencement date, any lease incentives received, any incremental costs of obtaining the lease, and any costs of removing the asset and restoring the site at the end of the lease.

However, where the lease requires nil or nominal consideration (usually referred to as a ‘peppercorn’ lease), the asset will instead be measured at its EUV, using market prices or rentals for equivalent land and properties, with the difference between the carrying amount of the right of use asset and lease liability treated as notional income (or on transition, a credit to the General Fund).

Enhancements to leased assets such as alterations to a leased building are not classified within right of use assets but remain classified as property, plant and equipment in accordance with the FReM.

Subsequent measurement – HMPPS as lessee

After initial recognition, the right of use asset will be measured using the fair value model. HMPPS considers that the cost model (measurement by reference to the lease liability) is a reasonable proxy for fair value in the case of non‑property leases, and for property leases of less than five years or with regular rent reviews. For other leases, the asset will be carried at a revalued amount.

The value of the asset will be adjusted for subsequent depreciation and impairment, and for reassessments and modifications of the lease liability as described below. Where the amount of a reduction to the asset exceeds the carrying value of the asset, the excess amount is recognised in expenditure.

The lease liability will be adjusted for the accrual of interest, repayments, reassessments and modifications. Reassessments are reappraisals of the probability of the options given by the existing lease contract, for example where we no longer expect to exercise an option, while modifications are changes to the lease contract.

Reassessments and modifications are accounted for by discounting the revised cash flows: using a revised discount rate where HMPPS becomes or ceases to be reasonably certain to exercise or not exercise an extension or termination option, or the lease is modified to amend the non‑cancellable period, change the term of the lease, change the consideration or the scope, or at the existing discount rate where there is a movement in an index or rate that will alter the cash flows, or the amount payable under a residual value guarantee changes.

Expenditure for each financial year includes interest on the lease liability and a straight‑line depreciation charge on the right of use asset over the life of the lease, together with any impairment of the right of use asset and any change in variable lease payments that was not included in the measurement of the lease payments during the period in which the triggering event occurred.

Rental payments in respect of leases of low‑value items, or with a term under 12 months, are also expensed.

Estimates and judgements

Where a lease is embedded in a contract for services, the amount to be recognised as the right of use asset and lease liability should be the standalone price of the lease component only. Where this is not readily observable, a determination will be made by reference to other observable data, such as the fair value of similar assets or price of contracts for similar non‑lease components.

As described above, HMPPS has determined the lease term by assessing the level of certainty as to whether termination or extension options will be exercised. In making these judgements, reliance has been placed on the professional judgement of estates staff, supported by information on corporate asset management plans, other business strategies, investment already made in the underlying asset, ongoing business needs and market conditions.

HMPPS has determined that the cost model is a reasonable proxy for fair value in most cases, because the rents payable are aligned to open market rates. In the case of longer leases where there are not regular rent reviews, there is a greater chance of divergence between cost and fair value, hence a professional revaluation is appropriate.

HMPPS leases various non‑property assets such as vehicles and IT equipment. Since 2023‑24 the leasing of a fleet of vehicles has also been recognised as a right of use asset. All other non‑property leases which are not individually low value are immaterial and consequently, no other non‑property leases have been recognised in these accounts.

1.11 Non‑current assets held for sale

Non‑current assets are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction, and a sale is considered highly probable. Property assets held for sale are stated at the lower of the carrying amount immediately prior to classification as held for sale and their fair value less the costs of selling the asset. Any subsequent impairment or reversal of impairment is recognised in the SoCNE. Non‑current assets classified as held for sale are not depreciated.

Gains and losses on disposal of non‑current assets are determined by comparing the proceeds with the carrying amount and are recognised in the SoCNE. When revalued assets are sold, the amounts included in the Revaluation Reserve are transferred to the General Fund.

1.12 Impairment

At each reporting date, in accordance with IAS 36 Impairment of Assets as adapted by the FReM, HMPPS assesses all assets for indications of impairment. If any such indications exist, the assets in question are tested for impairment by comparing the carrying value of those assets with their recoverable amounts. If the recoverable amount of an asset is less than its carrying value, the carrying value of the asset is reduced to its recoverable amount. The recoverable amount of an asset is the higher of its ‘fair value less costs to sell’ and ‘value in use’ as defined under ‘Subsequent valuation’ in Note 1.9. Current values in existing use are determined as follows:

• land and non‑specialised – existing use or market value where there is an open market for such properties

• specialised buildings – DRC on a modern equivalent asset basis

Impairment losses are recognised in the SoCNE, except where the asset had been revalued previously and a Revaluation Reserve is held for the asset. In this case the value of the reserve is released first, and then excess impairment is charged to the SoCNE.

Impairment losses resulting from a permanent diminution in the value of the asset, due to a clear consumption of economic benefit or service potential, are recognised directly in the SoCNE, and any Revaluation Reserve held for the asset is transferred to the General Fund.

The reversal of an impairment loss is recognised in the SoCNE to the extent that the original charge, adjusted for subsequent depreciation, was previously recognised, with any remaining amount recognised in the Revaluation Reserve.

1.13 Deferred income

Deferred income is recognised at the point in time where income has been received but a performance obligation has not been met.

1.14 Payables

These are financial liabilities other than those classified as held at fair value through profit or loss (net operating expenditure). Payables are recognised at the point in time where the expense of the same transaction is recognised.

They are valued initially at fair value, with the transaction value regarded as the fair value at the date of initial recognition. Where the time value of money is considered to be material, the estimated cash values are discounted using the effective interest rate. They are derecognised when all obligations are settled.

1.15 Service concession arrangements including PFI arrangements

Service concession arrangements, including those under PFI contracts, involve private sector operators being contractually required to provide services to the public using certain infrastructure assets. HMPPS classifies these as service concession arrangements when they satisfy the conditions set out in IFRIC 12 Service Concession Arrangements, as adapted for the public sector context by the FReM. Future payment streams are assessed to identify separately the infrastructure, interest and service components.

Where the service concession arrangement involves the creation or provision of an asset by the operator, HMPPS recognises the infrastructure asset at fair value (or the present value of future minimum infrastructure payments, if lower) as a non‑current asset in the SoFP, with a corresponding liability for future payments under the agreement, following the principles contained within IFRS 16. As per the FReM, this approach means the liability is remeasured whenever there is a change in future lease payments resulting from a change in an index or rate used to determine those payments.

The service element is charged to the SoCNE in the period the services are rendered by the operator.

The interest element is charged to the SoCNE over the contract to produce a constant periodic rate of interest on the remaining balance of the liability. Older prison PFI arrangements and other service concession arrangements use HM Treasury discount rates. HMP Thameside PFI and, where possible, any future PFI contracts will use the interest rate implicit in the contract.

‘Manage and Maintain’ contracts are used for some privately operated prisons where the building is owned by HMPPS, but access is provided to the operator in order to deliver the contracted services. As the assets relating to these contracts were owned by HMPPS prior to the start of the contract, there is no related liability or interest charge.

1.16 Inventories

Inventories comprise raw materials, work‑in‑progress, finished goods and consumable stores. Inventories are valued at the lower of current replacement cost and net realisable value. Current replacement cost is not considered materially different from historical cost.

1.17 Employee benefits

Short‑term benefits such as salaries and wages or post‑employment benefits resulting from employment and long‑term benefits such as long service awards, including termination benefits (for example early departure costs) and pension benefits are recognised at the cost of providing the benefit in the period in which it is earned by the employee, rather than when it is paid or becomes payable.

The department recognises the expected cost of the annual leave entitlement of its employees that is accrued at the end of the financial year in accordance with IAS 19 Employee Benefits.

Defined benefit pension schemes

Principal Civil Service Pension Scheme

The provisions of the PCSPS cover most past and present employees in HMPPS HQ and prisons. While this is an unfunded defined benefit scheme, in accordance with the FReM adaptation of IAS 19, HMPPS accounts for it as a defined contribution scheme. HMPPS recognises contributions payable as an expense in the year in which they are incurred, and the legal or constructive obligation is limited to the amount that it agrees to contribute to the fund.

Local Government Pension Scheme

HMPPS probation staff and past employees of the Probation Trusts, including those who transferred to Community Rehabilitation Companies and/or Commissioned Rehabilitative Services (CRS) are covered by the provisions of the LGPS via a pension fund administered by the Greater Manchester Pension Fund (GMPF). This is a funded defined benefit scheme.

The Secretary of State for Justice has provided a guarantee to GMPF in respect of the CRS’ participation in the GMPF for pension liabilities that transferred to the CRS.

The pension fund is subject to an independent triennial actuarial valuation to determine each employer’s contribution rate. The last formal actuarial valuation was as at 31 March 2025 and was carried out during 2025. The results of this valuation as at 31 March 2025 are reflected in the 2025‑26 accounts.

A professional calculation of the net pension position at the reporting date is obtained from Hymans Robertson LLP, the independent actuary for GMPF. The assumptions underpinning the actuarial calculations are subject to review as part of HMPPS’ annual reporting and audit process.

The IAS 19 net pension position is the present value of the defined benefit obligation less the fair value of plan assets at the reporting date. The present value of the obligation is determined by discounting estimated future cash outflows using rates as advised by the scheme actuary.

In between formal actuarial valuations, the obligation is approximated by adjusting the most recent full valuation using latest available membership data. Where this net position is a surplus, IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction is applied and limits that surplus by means of an asset ceiling to reflect that the full economic benefit is not realisable by the agency. Further detail on the application of IFRIC 14 is included in Note 18.

Remeasurements, comprising actuarial gains and losses, the effect of the asset ceiling, and the return on plan assets (excluding interest) are recognised within Other Comprehensive Expenditure in full in the period in which they arise. Service costs are recognised in the SoCNE and are spread systematically over the working lives of the employees. The net interest charge in the SoCNE reflects the unwinding of the discount applied to the net liabilities of the scheme.

IAS 19 requires that the discount rate is determined by reference to market yields at the end of the reporting period, on high‑quality AA corporate bonds of a currency and duration consistent with the currency and duration of the benefit obligations.

National Employment Savings Trust (NEST) Defined Contribution Pension Scheme

Under the government’s policy of ‘workplace pensions’, all workers who meet the minimum requirements for auto‑enrolment must be enrolled into a pension scheme by their employer.

The NEST Defined Contribution Pension Scheme is offered to individuals working in HMPPS who are not civil servants and are therefore not eligible to join the Civil Service Pension Scheme (public sector prisons and HQ prison staff) or the LGPS (Probation Service staff). This covers those working on a sessional or fee paid basis who are on a contract of services and not a contract of employment.

Civil Service Injury Benefits Scheme

The Civil Service Injury Benefits Scheme is accounted for under IAS 37. Please see Note 1.18.

1.18 Provisions and contingent liabilities

Provisions represent liabilities of uncertain timing or amount. Provisions are recognised when HMPPS has a present legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will be required to settle the obligation, and for which a reliable estimate can be made of the amount.

If the likelihood of payment is less than probable, but greater than remote, or the obligation cannot be measured reliably, a contingent liability is disclosed in the accounts.

Provisions and contingent liabilities are valued at the best estimate of the expenditure required to settle the obligation. They are discounted to present value using rates set by HM Treasury (3.64%, 4.22% and 5.32% for short‑term, medium‑term and long‑term cash flows respectively), where the effect is material.

Litigation

For litigation provisions, the likelihood of the outcome and the estimated amount due are calculated by legal professionals, using their professional judgement and expert knowledge of the case providing a range of values with the most likely estimate of the amount payable being provided for. Where legal cases relate to contract disputes, commercial professionals are also involved in the calculation of the likelihood and value. Further information on the inherent uncertainties in the litigation provision is included at Note 13.

Civil Service Injury Benefits Scheme

HMPPS is required to pay benefits to staff who are members of the PCSPS, who are injured in connection with their employment, under the Civil Service Injury Benefits Scheme. Benefits are paid only in respect of loss of earning capacity, and a provision is made for expected future costs. The Government Actuary’s Department provides HMPPS with annuity rates each year covering whole of life (for total liability value), one year, and two to five years (for cash flow values). These assumptions take the time value of money into account.

Injury benefit provisions are discounted using the HM Treasury post‑employment benefits real discount rate of 2.95% (2024‑25: 2.40%).

In calculating the provision, assumptions are made around life expectancy and the discount rate, as prescribed by HM Treasury, used in the calculation. Further detail is included at Note 1.20 and Note 13.

Dilapidation

The dilapidations provision reflects an estimate of the future expenditure required to return office space and other leased facilities to their original condition at the end of the lease term.

The provision is calculated using the assumed repairing level for each location, which is stipulated in the lease terms. A cost of repair per square metre is determined by our contracted surveyors, Cushman and Wakefield, and applied to the area for each lease at the specified level. The repair rates for each level are reviewed bi‑annually and updated as required.

The provision is calculated on the assumption that HMPPS will occupy the space until the end of each lease agreement with no intention to exercise any break options, unless there is a clear plan to terminate the lease early.

Further detail on assumptions is included at Note 13.

1.19 Value Added Tax

Most of HMPPS’ activities fall outside the scope of VAT. Accordingly, output tax is not usually charged and input tax on purchases is not recoverable. Irrecoverable VAT is charged to the relevant expenditure category or capitalised as part of non‑current assets. Where output tax is charged or input tax is recoverable, amounts are stated net of VAT.

1.20 Critical accounting estimates and judgements

HMPPS makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. Estimates and judgements are evaluated continually and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Critical accounting estimates and assumptions

The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Revaluation and impairment of non‑current assets

Subsequent to initial recognition, land and buildings (including dwellings) are recorded at current EUV based on professional valuations performed at 31 March each year by the Valuation Office Agency, an independent body, in accordance with the RICS Appraisal and Valuation Manual. For EUV buildings a new Commercial and Industrial Property Capital Price Index (CoPCaPI) has been created by VOA for application by public sector bodies. This has been adopted by HMPPS for the EUV properties. Buildings that are specialised, such as the prisons, are valued at DRC to a modern equivalent basis.

This modern equivalent is assumed to be in the same location with the same internal area as the existing property. The ‘beacon’ sets the cost to build a new modern equivalent asset and was updated in 2025‑26 based on the cost data from HMP Millsike. The revised beacon cost has been applied to all of the prisons physically inspected. However, a factor has been applied to the older prisons to reduce the DRC and remove increases relating to the high specification of a new build. The change in beacon values has caused the total valuation of specialist buildings physically inspected in year to increase more than they would have under the old beacons and this will continue over the remaining four years of the quinquennial cycle as the remaining properties are moved onto the new beacon basis when they are physically inspected. Substantially all other buildings are measured at current value determined from market‑based evidence. Each property is valued annually, with 25% of valuations physically inspected in 2025‑26. The remaining 75% of properties are valued by the application of appropriate indices (see Note 1.9). This ensures that the carrying values are not materially different from those that would be determined at the end of the reporting period.

Land associated with buildings valued to DRC has been assessed to current value and interpreted as EUV, having regard to the cost of purchasing a notional replacement site in the same locality, equally suitable for the existing use and of the same size, with normally the same physical and locational characteristics as the actual site, other than characteristics of the actual site that are irrelevant, or of no value, to the existing use. Where the use is too specialised to categorise in market terms, regard has been given to the range of uses prevailing in the locality of the actual site.

All assets other than land, buildings, intangible assets and assets under construction are ordinarily revalued at each reporting date using the Producer Price Index prepared by the Office for National Statistics.

LGPS assets and liabilities

The present value of the net pension position depends on several actuarially derived assumptions about inflation, salary and pension trends, discount factors and mortality rates. The estimated assets and liabilities are subject to fluctuation and uncertainty due to changes in these assumptions over time and differences between assumptions and actual events. Sensitivity analysis in relation to the key assumptions used in the calculation of the gross pension liability is provided in Note 18 along with details of the assumptions underlying the application of IFRIC 14.

The pension position for 2025‑26 has been calculated using suitable assumptions that have been selected and validated for use by the scheme actuary. All assumptions remain under constant review. As the economic climate changes and more information becomes available, assumptions are reconsidered. More detail is reflected in Note 18.

Provisions for liabilities and charges

The recognition and measurement of provisions rely on the application of professional judgement, historical experience and other factors expected to influence future events. Provision balances which contain regular, homogeneous transactions are often derived from complex financial models. Estimates and assumptions applied in these models are continually reviewed. Where the likelihood of a liability crystallising is deemed probable and can be measured with reasonable certainty, a provision is recognised. Further information is set out in Note 1.18 and Note 13.

Critical judgements in applying HMPPS accounting policies

Service concession arrangements

The classification of arrangements as service concession arrangements requires HMPPS to determine, based on an evaluation of the terms and conditions of the arrangements, whether it controls the infrastructure. Where HMPPS is judged to control the infrastructure, the contract assets are reflected in the SoFP. Further information is set out in Note 1.15 and Note 14.

2. Statement of operating costs by operating segment

Information on expenditure by directorate, based on the management information reported to the HAB, is presented in the financial performance section of this annual report (see How we spent our money in 2025 to 26), including a summary reconciliation to the SoCNE.

As HMPPS is not within the scope of IFRS 8 Operating Segments, the statement of operating costs by operating segment previously included within the financial statements is no longer required.

3. Income

	2025 to 26	2024 to 25
	£’000	£’000
(a) Income from contracts with customers
External sales of prison industries	6,293	7,297
Retail prison shop income	84,024	82,623
In‑cell TV income	1,936	1,855
Healthcare funding	67,509	75,886
Provision of immigration detention	3,233	3,521
Youth remand income	33,565	37,027
Education funding	11,857	11,359
Electronic monitoring services	12,397	15,357
Estates recharges	200	22
Other income	28,013	21,351
Total income from contracts with customers	249,027	256,298
(b) Other operating income
European Social Fund and other European funding	39,177	44,918
Rental income	462	614
Capital grant in kind	–	220
Total other operating income	39,639	45,752
Total operating income	288,666	302,050

Income from contracts with customers includes sales to prisoners through the prison shop, healthcare funding and youth remand income.

Income in respect of services rendered is recovered in line with the related service level agreement on a full cost basis.

4. Expenditure

4a Staff numbers and related costs

Staff numbers and further details of related costs, including exit packages, are reported in the remuneration and staff report in the accountability report.

	2025 to 26	2024 to 25
	£’000	£’000
Permanent staff – wages and salaries	2,703,711	2,537,983
Permanent staff – social security costs	366,061	274,955
Permanent staff – pension costs	595,148	602,211
Agency staff costs	43,043	38,249
Departures and severance payments	27,584	27,347
Inward secondments	5,000	4,756
Sub-total	3,740,547	3,485,501
Recoveries in respect of outward secondments	(4,924)	(6,178)
Total net costs	3,735,623	3,479,323

4b Purchase of goods and services

	2025 to 26	2024 to 25
	£’000	£’000
PFI prison service charges and privately operated prison charges	632,123	587,507
Service concession arrangement charges for prisoner escorting and custody services	183,354	169,572
Electronic monitoring	110,834	106,841
Contracted probation services	93,854	99,219
Accommodation, maintenance and utilities	805,682	781,256
Offender‑related costs	586,094	538,843
Offender learning	159,166	175,066
Secure children’s homes	36,556	32,318
Secure training centres	25,701	25,348
IT services and telecommunications	52,038	62,262
Training and other staff‑related costs	29,643	29,634
Travel, subsistence and hospitality	48,922	48,658
Professional services	51,101	48,488
Communications, office supplies and services	21,314	20,002
Compensation costs	40,733	30,818
Other costs	59,073	44,978
Total purchase of goods and services	2,936,188	2,800,810

Offender‑related costs include offender food, clothing, cleaning equipment, prisoner earnings and prison shop cost of sales.

4c Depreciation, amortisation and impairment charges

		2025 to 26	2024 to 25
	Notes	£’000	£’000
Depreciation – property, plant and equipment	5	450,022	457,027
Depreciation – right of use assets	7	23,812	25,500
Amortisation – intangible assets	6	15,731	14,504
Impairment charge/(reversal) – property, plant and equipment	5	6,200	216,227
Impairment charge/(reversal) – right of use assets	7	175	14,278
Impairment charge/(reversal) – intangible assets	6	4,817	–
Impairment charge/(reversal) – assets held for sale	8	(1)	–
Impairment charge/(reversal) – trade and other receivables	10	(655)	1,009
Total depreciation, amortisation and impairment charges		500,101	728,545

4d Notional expenditure

	2025 to 26	2024 to 25
	£’000	£’000
MoJ overhead recharges	568,163	492,637
Net (profit)/loss on disposal of assets	(648)	(399)
Capital grant in kind	–	–
External auditor’s remuneration	520	450
Total other non‑cash expenditure	568,035	492,688

MoJ overhead recharges

The MoJ overhead recharges represent the costs of services shared with the MoJ including estates, service transformation (including digital technology), finance, HR, communications, analytical services, shared services, and commercial and contract management. Recharges are apportioned based on appropriate cost drivers, such as headcount, floor space usage, or direct expenditure, to ensure a fair and transparent allocation aligned with operational resource consumption. Not included in these recharges is £18.1 million (2024-25: £20.6 million) relating to services provided by the MoJ. Although these costs are initially recorded by HMPPS, they are subsequently transferred through the SoCTE to the MoJ and are therefore not included in HMPPS expenditure in the SoCNE.

External auditor’s remuneration

The costs of the audit performed by the National Audit Office on behalf of the Comptroller and Auditor General are recognised as a non‑cash charge. During the year, HMPPS did not purchase any non‑audit services. The cost for the audit of the HMPPS annual report and accounts for 2025‑26 was £520,000 (2024‑25: £450,000).

4e Finance expense

		2025 to 26	2024 to 25
	Notes	£’000	£’000
Interest on LGPS pensions	18	24,054	24,068
Unwinding of discount on provisions	13	251	(240)
Total non‑cash finance expense		24,305	23,828
Finance charge on PFI	14c	7,197	8,232
Finance charge on right of use assets	7	3,429	1,538
Other finance charge		7	56
Total cash finance expense		10,633	9,826
Total finance expense		34,938	33,654

5. Property, plant and equipment

	Land	Buildings	Dwellings	Information technology	Plant and equipment	Furniture, fixtures and fittings	Payments on account and assets under construction	Total
2025 to 26	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Cost or valuation
At 1 April 2025	1,112,941	8,427,148	13,641	326,957	526,588	21,627	1,868,089	12,296,991
Additions	–	2,443	–	38,955	25,419	283	1,763,238	1,830,338
Disposals	–	(485)	–	(44,786)	(49,580)	(19)	–	(94,870)
Transfers	–	–	–	–	91	–	1,334	1,425
Reclassifications	–	523,955	–	14,923	5,914	–	(555,303)	(10,511)
Impairments	214	10,535	–	–	–	–	(16,949)	(6,200)
Revaluations	30,515	(67,800)	(245)	24,822	58,533	3,125	–	48,950
At 31 March 2026	1,143,670	8,895,796	13,396	360,871	566,965	25,016	3,060,409	14,066,123
Depreciation
At 1 April 2025	–	(11)	(12)	(208,462)	(371,191)	(17,340)	–	(597,016)
Charged in year	–	(370,083)	(555)	(36,813)	(41,377)	(1,194)	–	(450,022)
Disposals	–	–	–	44,786	49,064	19	–	93,869
Transfers	–	–	–	–	(91)	–	–	(91)
Reclassifications	–	(58)	–	–	–	–	–	(58)
Impairments	–	–	–	–	–	–	–	–
Revaluations	–	370,073	566	(15,646)	(44,623)	(2,666)	–	307,704
At 31 March 2026	–	(79)	(1)	(216,135)	(408,218)	(21,181)	–	(645,614)
Carrying value
At 31 March 2026	1,143,670	8,895,717	13,395	144,736	158,747	3,835	3,060,409	13,420,509
At 31 March 2025	1,112,941	8,427,137	13,629	118,495	155,397	4,287	1,868,089	11,699,975
Asset financing:
Owned	989,400	6,579,794	13,395	144,736	135,658	3,835	3,060,409	10,927,227
On‑balance sheet (SoFP) PFI and other service concession arrangement contracts	154,270	2,315,923	–	–	23,089	–	–	2,493,282
At 31 March 2026	1,143,670	8,895,717	13,395	144,736	158,747	3,835	3,060,409	13,420,509

Non‑operational assets

Included in the carrying values above are five non‑operational sites with a combined value of £4.3 million (31 March 2025: six non‑operational sites with a combined value of £4.4 million). These sites are vacant, but do not yet meet the criteria for classification as assets held for sale.

Valuation, estimation uncertainty and critical accounting estimates and assumptions

Further detail on valuation and estimation uncertainty can be found at Note 1.9 and on critical accounting estimates and assumptions at Note 1.20.

Reclassification as assets held for sale

Properties with a total carrying value of £(0.7) million were reclassified to assets held for sale in 2025‑26 (2024‑25: £13.4 million).

The 2025‑26 transfer relates to a reclassification of impairment associated with individual assets recategorised as assets held for sale in the prior year, with no impact on net book value or the SoCNE.

Property, plant and equipment (continued)

	Land	Buildings	Dwellings	Information technology	Plant and equipment	Furniture, fixtures and fittings	Payments on account and assets under construction	Total
2024-25	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Cost or valuation
Balance at 1 April 2024	1,083,092	7,990,647	27,003	270,584	513,778	21,077	1,767,842	11,674,023
Additions	700	2,538	–	41,931	21,182	18	1,171,847	1,238,216
Disposals	(1,409)	(258)	(885)	(1,289)	(16,406)	–	–	(20,247)
Transfers	(3,950)	(24,134)	–	–	(96)	–	(13,777)	(41,957)
Reclassifications	322	1,000,602	(12,780)	16,733	11,108	532	(1,035,096)	(18,579)
Impairments	(1,379)	(190,242)	–	(1,335)	(3,010)	–	(22,727)	(218,693)
Revaluations	35,565	(352,005)	303	333	32	–	–	(315,772)
At 31 March 2025	1,112,941	8,427,148	13,641	326,957	526,588	21,627	1,868,089	12,296,991
Depreciation
At 1 April 2024	–	–	(7)	(165,948)	(347,765)	(16,224)	–	(529,944)
Charged in year	–	(370,158)	(511)	(43,582)	(41,660)	(1,116)	–	(457,027)
Disposals	–	–	–	909	15,982	–	–	16,891
Transfers	–	66	–	–	–	–	–	66
Reclassifications	–	73	2	–	1	–	–	76
Impairments	–	–	–	209	2,257	–	–	2,466
Revaluations	–	370,008	504	(50)	(6)	–	–	370,456
At 31 March 2025	–	(11)	(12)	(208,462)	(371,191)	(17,340)	–	(597,016)
Carrying value
At 31 March 2025	1,112,941	8,427,137	13,629	118,495	155,397	4,287	1,868,089	11,699,975
At 31 March 2024	1,083,092	7,990,647	26,996	104,636	166,013	4,853	1,767,842	11,144,079
Asset financing:
Owned	958,671	6,236,809	13,629	118,495	124,784	4,287	1,868,089	9,324,764
On‑balance sheet (SoFP) PFI and other service concession arrangement contracts	154,270	2,190,328	–	–	30,613	–	–	2,375,211
At 31 March 2025	1,112,941	8,427,137	13,629	118,495	155,397	4,287	1,868,089	11,699,975

6. Intangible assets

	Software	Licences	Payments on account and assets under construction	Total
2025 to 26	£’000	£’000	£’000	£’000
Cost or valuation
At 1 April 2025	265,033	21,776	10,903	297,712
Additions	969	332	10,272	11,573
Disposals	(62,976)	(2,411)	–	(65,387)
Reclassifications	13,539	–	(6,449)	7,090
Revaluations	37	–	–	37
Transfers	–	–	16,087	16,087
Impairments	–	–	(4,817)	(4,817)
At 31 March 2026	216,602	19,697	25,996	262,295
Amortisation
At 1 April 2025	(195,109)	(20,626)	–	(215,735)
Charged in year	(15,383)	(348)	–	(15,731)
Disposals	62,976	2,411	–	65,387
Reclassifications	–	–	–	–
Revaluations	(2)	–	–	(2)
Transfers	–	–	–	–
At 31 March 2026	(147,518)	(18,563)	–	(166,081)
Carrying value
At 31 March 2026	69,084	1,134	25,996	96,214
At 31 March 2025	69,924	1,150	10,903	81,977
Asset financing
Owned	69,084	1,134	25,996	96,214
At 31 March 2026	69,084	1,134	25,996	96,214

At 31 March 2026 and 31 March 2025, there were no individually material intangible assets.

Intangible assets (continued)

	Software	Licences	Payments on account and assets under construction	Total
2024-25	£’000	£’000	£’000	£’000
Cost or valuation
At 1 April 2024	235,486	21,504	21,704	278,694
Additions	6,259	–	5,102	11,361
Disposals	(6,829)	–	–	(6,829)
Reclassifications	29,841	272	(25,038)	5,075
Revaluations	276	–	–	276
Transfers	–	–	9,135	9,135
Impairments	–	–	–	–
At 31 March 2025	265,033	21,776	10,903	297,712
Amortisation
At 1 April 2024	(188,281)	(19,765)	–	(208,046)
Charged in year	(13,643)	(861)	–	(14,504)
Disposals	6,829	–	–	6,829
Reclassifications	–	–	–	–
Revaluations	(14)	–	–	(14)
Transfers	–	–	–	–
At 31 March 2025	(195,109)	(20,626)	–	(215,735)
Carrying value
At 31 March 2025	69,924	1,150	10,903	81,977
At 1 April 2024	47,205	1,739	21,704	70,648
Asset financing
Owned	69,924	1,150	10,903	81,977
At 31 March 2025	69,924	1,150	10,903	81,977

7. Leases

Right of use lease asset			2025 to 26			2024 to 25
	Land and buildings	Other	Total	Land and buildings	Other	Total
	£’000		£’000	£’000		£’000
Cost or valuation
At 1 April	193,400	10,101	203,501	226,176	3,943	230,119
Additions	3,419	–	3,419	37	–	37
Disposals	(1,481)	–	(1,481)	(5,797)	–	(5,797)
Remeasurements	16,114	–	16,114	(6,840)	6,158	(682)
Reclassifications	4,154	–	4,154	–	–	–
Revaluations	(509)	–	(509)	(5,898)	–	(5,898)
Impairments	(175)	–	(175)	(14,278)	–	(14,278)
Transfers	–	–	–	–	–	–
At 31 March	214,922	10,101	225,023	193,400	10,101	203,501
Depreciation
At 1 April	(80,913)	(2,144)	(83,057)	(65,922)	(246)	(66,168)
Charged in year	(21,377)	(2,435)	(23,812)	(23,602)	(1,898)	(25,500)
Disposals	1,481	–	1,481	5,797	–	5,797
Reclassifications	(12)	–	(12)	–	–	–
Revaluations	147	–	147	2,814	–	2,814
Transfers	–	–	–	–	–	–
At 31 March	(100,674)	(4,579)	(105,253)	(80,913)	(2,144)	(83,057)
Net right of use assets	114,248	5,522	119,770	112,487	7,957	120,444

Lease liabilities

A maturity analysis of contractual undiscounted cash flows relating to lease liabilities is presented below. The cash flows and balances are presented net of irrecoverable VAT.

			31 March 2026			31 March 2025
Buildings	Gross £’000	Interest £’000	Net £’000	Gross £’000	Interest £’000	Net £’000
Amounts falling due:
Not later than one year	25,132	(2,982)	22,150	22,844	(2,062)	20,782
Later than one year but not later than five years	71,394	(7,229)	64,165	68,000	(5,204)	62,796
Later than five years	41,493	(2,764)	38,729	46,327	(2,648)	43,679
	138,019	(12,975)	125,044	137,171	(9,914)	127,257
Less: unaccrued interest	(12,975)			(9,914)
Balance at 31 March	125,044			127,257
Current			22,150			20,782
Non‑current			102,894			106,475
			125,044			127,257

			31 March 2026			31 March 2025
Other	Gross £’000	Interest £’000	Net £’000	Gross £’000	Interest £’000	Net £’000
Amounts falling due:
Not later than one year	1,900	(196)	1,704	2,091	(310)	1,781
Later than one year but not later than five years	3,192	(90)	3,102	5,923	(286)	5,637
Later than five years	–	–	–	–	–	–
	5,092	(286)	4,806	8,014	(596)	7,418
Less: unaccrued interest	(286)			(596)
Balance at 31 March	4,806			7,418
Current			1,704			1,781
Non‑current			3,102			5,637
			4,806			7,418

Amounts recognised in the Statement of Comprehensive Net Expenditure

	31 March 2026	31 March 2025
	£’000	£’000
Depreciation charge	23,812	25,500
Interest expense	3,429	1,538
Short‑term leases	–	19
Low value asset leases (excluding short‑term leases)	–	9
Licenses not capitalised	–	689
Total	27,241	27,755

Amounts recognised in the Statement of Cash Flows

	31 March 2026	31 March 2025
	£’000	£’000
Interest expense	3,429	1,538
Repayment of principal on leases	23,515	25,057
Total	26,944	26,595

8. Assets held for sale

	31 March 2026	31 March 2025
	£’000	£’000
Cost or valuation
At 1 April	9,898	2,490
Reclassifications	(663)	13,428
Disposals	(1,764)	(5,441)
Impairments	1	–
Revaluations	(2,228)	(579)
At 31 March	5,244	9,898

HMPPS has committed to a plan to sell various surplus properties, which are to be sold for commercial use and domestic dwellings. The properties are available for sale in their present condition and the sales are highly probable to occur within one year from the date of classification as an asset held for sale.

9. Inventories

	31 March 2026	31 March 2025
	£’000	£’000
Raw materials	28,448	32,453
Work‑in‑progress	2,347	2,287
Finished goods	2,152	2,248
	32,947	36,988
Consumables	29,200	33,475
Total inventories	62,147	70,463

10. Trade and other receivables

	31 March 2026	31 March 2025
	£’000	£’000
Trade receivables	25,150	28,414
Other receivables	22,835	21,145
VAT receivables	47,820	40,914
Intra‑departmental receivables	5,186	11,332
Prepayments	5,340	6,722
Accrued income	21,337	24,518
Total trade and other receivables	127,668	133,045

11. Cash and cash equivalents

	31 March 2026	31 March 2025
	£’000	£’000
Balance at 1 April	59,201	61,308
Net change in cash and cash equivalents	(2,471)	(2,107)
Balance at 31 March	56,730	59,201
The following balances at 31 March were held at:
Government Banking Service	55,204	57,487
Commercial banks and cash in hand	1,526	1,714
Cash at bank and in hand	56,730	59,201

At 31 March 2026, all bank accounts were held with the Government Banking Service.

Third party monies

At 31 March 2026, HMPPS held cash of £13.5 million (£13.7 million at 31 March 2025) on behalf of offenders. As this cash belongs to third parties, the balance is not included in the SoFP in these accounts.

12. Trade and other payables

12a. Amounts falling due within one year

	31 March 2026	31 March 2025
	£’000	£’000
Trade payables	67,574	60,439
Taxation and social security	71,091	61,156
Other payables	70,531	73,281
Intra‑departmental payables	123,061	128,031
Accruals	709,964	523,379
Deferred income	14,258	54,554
Total	1,056,479	900,840

The significant increase in accruals is driven mainly by the stage of completion of capital expansion projects and the accrual of a 2025‑26 pay award paid post‑year end.

12b. Amounts falling due after more than one year

	31 March 2026	31 March 2025
	£’000	£’000
Local authority loan balances	197	238
Total	197	238

13. Provisions for liabilities and charges

				31 March 2026	31 March 2025
	Leasehold property dilapidations	Injury Benefits Scheme	Litigation and other provisions	Total	Total
	£’000	£’000	£’000	£’000	£’000
Balance at 1 April	54,613	105,932	50,304	210,849	221,272
Provided in year	2,018	2,393	48,585	52,996	42,380
Provisions not required written back	(833)	(2,037)	(10,559)	(13,429)	(16,866)
Provisions utilised in year	(859)	(6,886)	(24,378)	(32,123)	(35,697)
Unwinding of discount	–	–	251	251	(240)
Balance at 31 March	54,939	99,402	64,203	218,544	210,849

Analysis of expected timing of discounted cash flows

				31 March 2026	31 March 2025
	Leasehold property dilapidations	Injury Benefits Scheme	Litigation and other provisions	Total	Total
	£’000	£’000	£’000	£’000	£’000
Not later than one year	12,013	6,751	10,919	29,683	26,122
Later than one year but not later than five years	9,613	24,300	41,423	75,336	72,408
Later than five years	33,313	68,351	11,861	113,525	112,319
Balance at 31 March	54,939	99,402	64,203	218,544	210,849

Leasehold property dilapidations

Dilapidation costs are an estimate of the expenditure required to return vacated leased properties to their original condition. The movement in year is as a result of:

• updated information relating to property vacations

• new properties leased during the year

• leases terminated during the year

• changes in square metre (SQM) rate assumptions

The key assumption used in calculating the dilapidation provision is the rate per square metre for each of the three assumed lease types which are set by building surveyors. These are reviewed and updated biannually, using their expert knowledge to reflect changes in the rate.

For sensitivity purposes, we have calculated the percentage change in value of the dilapidation provision based on various changes in the square metre rate.

% change in SQM rate	Change in dilapidation value (£000)	Change in dilapidation %
+5%	1,789	3%
-5%	(1,789)	(3%)

Civil Service Injury Benefits Scheme provisions

From 1 April 1998, HMPPS is required to pay benefits under the Civil Service Injury Benefits Scheme. The scheme pays benefits to any PCSPS member who suffers disease or injury, which is wholly or partially attributable to the nature of the duty, or who suffers an attack or similar act which is directly attributable to employment within the service. Benefits are paid only in respect of loss of earning capacity and are designed to enhance a beneficiary’s income up to a guaranteed minimum of 85% of pensionable earnings.

One of the key assumptions used in calculating the provision is the discount rate used to place a present value on projected future cash flows. The discount rates are prescribed by HM Treasury and are therefore outside the formal control of HMPPS.

The Injury Benefits Scheme provision is sensitive to the change in discount rate which takes the time value of money into account in the annuity rates used in the calculation. The discount rate is one factor used in the calculation of an annuity rate, along with others such as life expectancy. There was an increase in the discount rate prescribed by HM Treasury, from 2.40% to 2.95%, which in turn decreased the annuity rate used in the calculation. This has decreased the provision by £6.7 million.

Mortality assumptions are derived by the Government Actuary’s Department in line with the population within the Injury Benefits Scheme membership. For sensitivity purposes, we estimate that a one‑year decrease in life expectancy results in the annuity rate being slightly lower, with the reduction of up to 0.5. For 2025‑26, a one‑year decrease in member life expectancy would decrease the liability by £2.6 million or 2%.

Litigation and other provisions

Litigation provisions of £63.6 million (31 March 2025: £50.3 million) comprise legal claims against HMPPS and reflect all known claims where legal advice indicates that it is more likely than not that the claim will be successful, and the amount of the claim can be reliably estimated.^{[footnote 6]}

Legal claims which are likely to succeed with a lesser degree of certainty or cannot be estimated reliably are disclosed as contingent liabilities in Note 17.

Provisions for seven cases which have resulted in annuities arising from litigation are discounted using the HM Treasury rates as payments are due over a number of years – more than 20 years in some cases. The change in the discount rate prescribed by HM Treasury does not have a material effect on the litigation provision balance given the low number of annuity cases.

Other general litigation provisions are not discounted, on the basis that the potential discounting on claims that could continue for longer than 12 months is uncertain and is not material.

The nature of these claims results in inherent uncertainty in the estimation assumptions used to provide for such cases. The significant estimations and judgements required for the calculation of this provision are the likely finding in each litigation case, the timeframe in which it is likely to be resolved, and the value of any compensation which will be due to the claimant. In order to manage the risk inherent in these judgements, cases are reviewed frequently and on an individual basis to ensure that legal experts can attribute specific scenarios to those evidenced in each case. They use their expertise to provide timeframes on settling each claim, but this is a best estimate and progress on each claim may differ as new evidence becomes available and values change to reflect this.

As a result, we do not consider there to be any meaningful sensitivity analysis that would provide further insight on the above claims as there are no common underlying assumptions across the claims.

14. Commitments under PFI contracts and other service concession arrangements

14a. On‑balance sheet (SoFP) PFI contracts and other service concession arrangements at 31 March 2026

Project name	Contract start date	Duration (years)	Description
PFI contracts
HMP Rye Hill	January 2001	25	Design, build, finance and operate a 600‑place category B prison HMP Rye Hill at Onley, near Rugby. Contract has been extended by 2 years until January 2028
HMP Dovegate	July 2001	25	Design, build, finance and operate a 1,060‑place category B prison and therapeutic community facility at HMP Dovegate, Marchington
HMP Bronzefield	June 2004	25	Design, build, finance and operate a 500‑place category B prison at Ashford in Middlesex
HMP Peterborough	March 2005	25	Design, build, finance and operate an 840‑place category B prison at Peterborough in Cambridgeshire
HMP Thameside	March 2012	25	Design, build, finance and operate a 900‑place category B prison at Woolwich in London
Oakhill Secure Training Centre	May 2004	25	Design, construct and manage a secure training centre, located in Oakhill, Milton Keynes
Prison Escort Custody Service	August 2020	10	The supply and running of prison vans and escorts
Other service concession arrangements
HMP Doncaster	October 2011	15	Manage and maintain a 1,145‑place category B prison at Doncaster in South Yorkshire
HMP Oakwood	April 2012	15	Manage and maintain a 2,100‑place category C prison at Featherstone in the West Midlands
HMP Northumberland	December 2013	15	Manage and maintain a 1,348‑place category C prison at Morpeth in Northumberland
HMP Five Wells	February 2022	10	Manage and maintain a 1,680‑place category C prison at Wellingborough in Northampton
HMP and YOI Parc	December 2022	10	Manage and maintain a 1,652‑place category B prison and 60‑place YOI at Bridgend in South Wales
HMP Fosse Way	May 2023	10	Manage and maintain a 1,715‑place category C prison at HMP Fosse Way in Leicester
HMP Altcourse	June 2023	10	Manage and maintain a 1,164‑place category B prison located in Liverpool
HMP Ashfield	November 2024	10	Manage and maintain a 400‑place category B prison at Pucklechurch in South Gloucestershire
HMP Millsike	April 2025	10	Manage and maintain a 1,468‑place category C prison at Full Sutton near York
HMP Forest Bank	January 2026	10	Manage and maintain a 1,460‑place category B prison located in Salford, Greater Manchester

14b. Commitments under PFI and other service concession contracts

Details of the imputed finance lease charges under service concession arrangements recognised on the SoFP are given in the table below for each of the following periods:

	31 March 2026	31 March 2025
	£’000	£’000
Rentals due not later than one year	25,652	28,098
Rentals due later than one year but not later than five years	84,367	82,309
Rentals due later than five years	50,858	78,569
	160,877	188,976
Less interest element	(33,121)	(40,310)
Present value of obligations	127,756	148,666

The present value of liabilities under service concession arrangements recognised on the SoFP are given in the table below for each of the following periods:

	31 March 2026	31 March 2025
	£’000	£’000
Rentals due not later than one year	19,314	20,911
Rentals due later than one year and not later than five years	67,176	77,527
Rentals due later than five years	41,266	50,228
Present value of obligations	127,756	148,666

Details of the minimum service charge under service concession arrangements recognised on the SoFP are given in the table below for each of the following periods:

	31 March 2026	31 March 2025
	£’000	£’000
Not later than one year	783,504	801,412
Later than one year but not later than five years	1,684,611	2,080,788
Later than five years	253,710	353,348
Total service element	2,721,825	3,235,548

Future commitments are estimates based on assumptions, using the best information available. The service concession arrangement for HMP Dovegate is due to commence in July 2026 so while it is not included in the table at 14a, the future service charges are included in the table above.

14c. Charge to the Consolidated Statement of Comprehensive Net Expenditure

The total amount charged in the SoCNE in respect of on‑balance sheet (SoFP) PFI and other service concession arrangements transactions was £815.7 million for the year to 31 March 2026 (2024‑25: £771.9 million). Of this total the service element was £808.5 million (2024‑25: £763.7 million) and the interest charges were £7.2 million (2024‑25: £8.2 million).

15. Other financial commitments

HMPPS has entered into non‑cancellable contracts for which we have a financial commitment which are not included elsewhere within these accounts.

	31 March 2026	31 March 2025
	£’000	£’000
Not later than one year	101,355	34,943
Later than one year but not later than five years	–	14,199
Later than five years	–	–
Total other financial commitments	101,355	49,142

16. Capital commitments

Capital expenditure contracted for at the end of the reporting period but not included in these financial statements is as follows:

	31 March 2026	31 March 2025
	£’000	£’000
Property, plant and equipment	2,359,096	1,671,287
Total capital commitments	2,359,096	1,671,287

The main cause of the significant year‑on‑year movement in capital commitments is the different stages of construction of prison builds at each year end.

17. Contingent liabilities

HMPPS faces claims amounting to £66.4 million (31 March 2025: £69.1 million) for injury to staff, prisoners and the public and for third‑party contract disputes where the likelihood of a liability arising is deemed possible but not likely or not reliably measurable. Other claims where it is more likely than not that a liability will arise have been provided for in the accounts, (see Note 13). In addition, there are a number of litigation claims that are in the process of being assessed. As a result, they are currently deemed unquantifiable.

Remote contingent liabilities reported to Parliament are disclosed in the accountability report.

18. Pensions

Staff costs in Note 4(a) include the cost of pension contributions made by HMPPS.

25 individuals retired early on ill health grounds (2024‑25: 15). The total additional accrued pension liabilities in the year amounted to £0.3 million (2024‑25: £0.1 million).

Principal Civil Service Pension Scheme

The PCSPS and the Civil Servants and Others Pension Scheme – known as ‘alpha’ – are unfunded, multi‑employer defined benefit schemes. HMPPS is unable to identify its share of the underlying assets and liabilities. Civil Service pension schemes are accounted for as defined contribution plans as a result. The scheme actuary last valued the PCSPS at 31 March 2024. Details can be found at www.civilservicepensionscheme.org.uk

For the year to 31 March 2026, employer contributions of £490.2 million were payable to the PCSPS (2024‑25: £472.7 million) at a rate of 28.97% (2024‑25: 28.97%) of pensionable pay.

The scheme actuary reviews employer contributions usually every four years following a full scheme valuation. The contribution rates are set to meet the cost of the benefits accruing during 2025‑26 to be paid when the member retires and not the benefits paid during this period to existing pensioners. As a result of the 2024 valuation, the employer contribution rate from 1 April 2027 to 31 March 2031 will be at 22.32% of pensionable pay (2020 valuation: 1 April 2024 to 31 March 2027 at 28.97% of pensionable pay).

Partnership pension accounts

Employees can opt to open a partnership pension account, which is a stakeholder pension with an employer contribution. Employer contributions of £1.3 million (2024‑25: £1.4 million) were paid to one or more of the panels of three appointed stakeholder pension providers. Employer contributions are age‑related and range from 8% to 14.75% (2024‑25: 8% to 14.75%) of pensionable pay.

Employers also match employee contributions up to 3% of pensionable pay. In addition, employer contributions of £0.05 million, 0.5% of pensionable pay, (2024‑25: £0.05 million, 0.5%) were payable to the PCSPS to cover the cost of the future provision of lump sum benefits on death in service or ill health retirement of these employees. There were contributions due of £0.1 million, and no contributions prepaid to the partnership pension providers at 31 March 2026.

National Employment Savings Trust (NEST) Defined Contribution Pension Scheme

Under the government’s policy of ‘workplace pensions’, all workers who meet the minimum requirements for auto‑enrolment must be enrolled into a pension scheme by their employer.

The NEST Defined Contribution Scheme is offered to individuals working in HMPPS who are not civil servants and are therefore not eligible to join the Civil Service Pension Scheme (public sector prisons and HQ prison staff) or the LGPS (Probation Service staff). This covers those working on a sessional or fee‑paid basis who are on a contract of services and not a contract of employment.

The NEST scheme is run by the NEST Corporation, a non‑departmental public body. It is accountable to Parliament through the Department for Work and Pensions and is independent of government in its day‑to‑day decisions.

Pension contributions are based on a pensionable pay range of between £6,240 and £50,270 (2024‑25: £6,240 and £50,270). A minimum pension contribution is not mandatory for pensionable pay below £6,240 (2024‑25: £6,240). Minimum contributions for 2025‑26 were 8% in total: 3% by employers and 4% by employees, with 1% through tax relief from government (2024‑25: 3% by employers and 4% by employees, with 1% through tax relief from government). For the year to 31 March 2026, employer contributions of £0.03 million were paid (2024‑25: £0.03 million).

Local Government Pension Scheme

Past employees of the Probation Trusts, and LGPS probation staff who transferred to CRS providers, to the former Community Rehabilitation Companies and to the Probation Service, are covered by the provisions of LGPS via one pension fund, GMPF, administered by their local authority council, Tameside Metropolitan Borough Council. The assets and liabilities from the former Probation Trusts’ own pension funds were transferred to GMPF. The total pension obligation will continue to be the responsibility of HMPPS and will be reported in the HMPPS annual report and accounts.

The LGPS is a statutory scheme primarily governed by the LGPS Regulations 2013 and the LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014. These are subject to amendment over time. The LGPS is a funded, multi‑employer defined benefit scheme. HMPPS recognises an LGPS pension scheme liability in these accounts, in accordance with IAS 19.

A liability arises as employees earn their future entitlement to payments when they retire. The pension fund is subject to an independent triennial actuarial valuation to determine each employer’s contribution rate. The contribution rates reflect benefits as they are accrued and reflect the past experience of the schemes.

The LGPS provides benefits on a ‘final salary’ basis, up to 31 March 2014, at a normal retirement age of 65. For pensionable service up to 31 March 2008, benefits accrued at the rate of 1/80th of pensionable salary for each year of service. In addition, a lump sum equivalent to 3/80ths of final pay for every year of total membership is payable on retirement. Benefits accrued at the rate of 1/60th of pensionable salary for service from 1 April 2008 to 31 March 2014 with no automatic lump sum.

From 1 April 2014, the scheme provides benefits on a career average revalued earnings (CARE) basis. Benefits accrue at the rate of 1/49th of pensionable salary for each year of service.

The scheme permits employees to take a lump sum payment on retirement in exchange for a reduction in their future annual pension. Members pay contributions of between 5.5% and 12.5% of pensionable earnings. Member contributions changed from 1 April 2014 and benefits accrued from this date are on a career average revalued earnings basis, with protections in place for those members in the scheme before the changes took effect.

Following the 2025 triennial valuation, the probation employer contribution rate for the period 1 April 2026 to 31 March 2029 is 18.5%. For the year to 31 March 2026, HMPPS paid employer contributions of £200.9 million to GMPF, relating to current probation staff, at 26.5% (2024‑25: £192.9 million at 26.5%).

The pension position as at 31 March 2026, as detailed below, is based on the actuarial report from Hymans Robertson LLP, the independent actuary for GMPF, in compliance with IAS 19. There were no plan curtailments or settlements during the year. The transfer of Ashley House Approved Premises into HMPPS on 1 April 2025 has resulted in the transfer of LGPS assets and obligations for the active, deferred and pensioner members into GMPF. This is shown as a business combination in the table ‘Movements in the LGPS defined benefit obligation during the year’.

Full details of GMPF’s investment strategy statement and funding strategy statement, including its annual report and financial statements, and responsibilities of the GMPF Management Panel can be found on the GMPF website: www.gmpf.org.uk

Tameside Metropolitan Borough Council is the administering authority of GMPF.

A number of assumptions are made as part of the actuarial valuation process, and the major assumptions are set out in this table.

The assumptions underlying the calculation of the net pension position as at 31 March 2026 are used for accounting purposes as required under IAS 19.

Risks associated with the fund in relation to accounting

The net pension position, as at 31 March 2026, is shown in the disclosure below. This reflects the appropriate assumptions, and all assumptions remain under constant review. As the economic climate changes and more information becomes available, assumptions will be updated to reflect this.

HMPPS is only liable for the pension obligations due to GMPF relating to Probation Service employees (and ultimately the CRS employees under the Secretary of State for Justice Pension Guarantee, referred to in Note 1.17). HMPPS is not liable for pension obligations of other employers that participate in the LGPS with GMPF.

Should HMPPS move to another pension fund or pension scheme, an exit payment to cover the pension liability due would be determined by GMPF and their actuary. However, there are no plans to move to another pension fund or pension scheme.

Discount rate

The discount rate is the most significant financial assumption for assessing pension obligations. An increase in the discount rate results in a decrease in the value of the pension liability for accounting purposes and vice versa. The discount rate used in these financial statements, as required by IAS 19, is based on the market yields of high‑quality corporate bonds valued as at the reporting date of 31 March. Hymans’ corporate bond yield curve is based on the constituents of the iBoxx AA corporate bond index. The discount rate assumptions set by the actuary are considered appropriate. The increase in the discount rate compared to last year has resulted in a further reduction in the pension obligations, the impact of which is discussed further below in ‘Accounting for a net pension surplus and asset ceiling restriction’.

Inflation

The inflation assumption is the second most significant financial assumption for assessing pension obligations and typically drives the assumption for salary growth and pension increases (to the extent they are inflation linked).

A higher inflation assumption will lead to an increase in pension liabilities. The government announced that the measure of Retail Price Index will change from 2030 to be in line with the Consumer Price Index, including housing costs. This has been allowed for when deriving the inflation assumption. Market‑derived Consumer Price Index inflation has risen over the year, which has led to a 0.25% increase in this assumption for 2025‑26.

Mortality

The baseline mortality assumptions are based on analysis carried out by longevity experts Club Vita. Future life expectancy predictions use their continuous mortality investigation (CMI) model. For 2025‑26, the CMI 2025 model has been used, which uses more up‑to‑date longevity data. This has resulted in a reduction in obligations.

Risk mitigation strategies

The GMPF Management Panel carries out a similar role to the trustees of a pension scheme. They are key decision makers for:

• investment strategy

• monitoring investment activity and performance

• overseeing administrative activities

• guidance to officers in exercising delegated powers

• reviewing governance arrangements

Each local council within Greater Manchester is represented on the Management Panel, along with the MoJ. There have been no concerns raised by the MoJ to date on GMPF’s investment or funding strategy or asset performance.

Virgin Media v NTL Pension Trustees judgement

Following last year’s Court of Appeal judgement in Virgin Media Limited v NTL Pension Trustees Limited, on 5 June 2025 the government announced it would introduce legislation to give affected pension schemes the ability to retrospectively obtain written actuarial confirmation that historic benefit changes met the necessary standards.^{[footnote 7]}

The LGPS will therefore work with its advisers to understand whether a review of historic Section 37 confirmations is required and if necessary, undertake such a review.

McCloud judgement

The December 2018 McCloud judgement found that transitional arrangements put in place during the reform of firefighters’ and judges’ pension schemes was discriminatory on grounds of age. The government has confirmed this ruling also applies to the LGPS. For the 2022 valuation, McCloud liabilities were included as set out in the Department for Levelling Up, Housing and Communities’ 2022 valuation letter. A further government response was made on 6 April 2023 in relation to McCloud and the amendments to the statutory underpin.^{[footnote 8]} The actuary has advised that no further adjustment to the cost in the pension obligation is required for 2025‑26. Further information on the McCloud judgement can be found at www.civilservicepensionscheme.org.uk/memberhub/remedy-hub/

Accounting for a net pension surplus and asset ceiling restriction

The net pension position at 31 March 2026 was a net surplus of £1,955 million, before any adjustment for the asset ceiling restriction (31 March 2025: £1,710 million), as set out in the actuary report provided by Hymans, under IAS 19.

IAS 19 requires that the discount rate is determined by reference to market yields at the end of the reporting period, on high‑quality AA corporate bonds of a currency and duration consistent with the currency and duration of the benefit obligations. The discount rate at 31 March 2026 is higher compared to the previous year, reflecting a higher yield on high‑quality corporate bonds and significantly reducing the pension obligation.

Under the requirements of IFRIC 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, the agency is required to consider whether it is appropriate to limit the amount of net pension surplus in the financial statements which was determined under IAS 19 if the full economic benefit cannot be obtained. IAS 19 provides a definition of an asset ceiling for these purposes as the present value of any economic benefits available in the form of refunds from the plan or reductions in future contributions to the plan, with the lower of the surplus and the asset ceiling being recognised. IFRIC 14 provides further guidance on calculating figures for an asset ceiling with reference to minimum funding requirements.

A refund would only be available to the agency on exiting the scheme. However, participation in the current pension scheme is dictated by statute meaning an exit would rely on the occurrence of an uncertain future event not wholly within the agency’s control – that is, an act of Parliament. Therefore, the agency does not have an unconditional right to a refund of the surplus.

The appropriate method is therefore to consider the economic benefit available as a contribution reduction. The agency has concluded that primary contributions to the scheme (2026-27: 17.2%, 2025 to 26: 18.1%), those related to ill health retirements (2026-27: 2.5%, 2025 to 26: 4.3%) and the negative secondary contribution rate of -1.2% due to being fully funded following the 2025 valuation (2025 to 26: no negative rate) establish a minimum funding requirement for future contributions under IFRIC 14. The economic benefit available as a reduction in future contributions is calculated as the sum of:

(a) any amount that reduces future minimum funding requirement contributions for future service because the entity made a prepayment

(b) the estimated future service cost less the estimated minimum funding requirement contributions that would be required for future service in those periods if there were no prepayment as described in (a)

In determining this, the agency made a number of judgements.

• We consider it appropriate to treat the current service charge and the primary contributions as continuing in perpetuity as there is no intention to cease operations of the Probation Service, or to change the pension scheme available to employees of the service.

• We consider it appropriate to treat the negative secondary contribution rate over the standard funding time horizon of a 20‑year period.

• The additional contributions to meet ill health retirement costs are discretionary with the rate set as part of the triennial valuation. While we would anticipate continuing to fund early retirement on the grounds of ill health via this mechanism, the financial commitment only exists for the three‑year period covered by the valuation. In calculating minimum funding requirements under IFRIC 14, we therefore judge the appropriate period over which to include the ill health retirement contributions to be the three years committed to as a result of the 2025 valuation.

• Given the new rates set by the actuary as part of the 2025 valuation were agreed before the end of the financial year, we consider it appropriate to use these in the calculation rather than the rates in force during 2025‑26. This is due to the nature of the asset ceiling calculation being forward looking.

• We do not consider that the economic benefit available as a reduction in future contributions can be meaningfully used if negative. This figure will therefore be taken as the maximum of the calculated figure and nil in the calculation of the asset ceiling.

• The 2025 triennial valuation resulted in a contribution rate of -1.2% being set by the actuaries in relation to past service. This is based on a funding time horizon of 20 years and reflects the fact that the HMPPS share of the pension fund is now fully funded. IFRIC 14 requires that, to the extent that the contributions payable will not be available after they are paid into the plan, the entity shall recognise a liability when the obligation arises. Given the negative rate, we consider that this represents an opportunity to reduce primary contributions and it has therefore been included in the calculation of the minimum funding requirement as discussed above. The contribution rate relating to past service in 2024‑25 was 4.1% and was therefore considered separately as an obligation relating to past service.

Annuity rates for these three time periods were provided by the scheme’s actuary using the same assumptions as the IAS 19 calculation as described below.

We consider it appropriate to restrict the net asset relative to funding obligations by use of the asset ceiling. This means that the asset ceiling is applied to the net surplus excluding the unfunded liabilities figure of £23.9 million. These unfunded liabilities are then added back to the closing liability position.

Having applied IFRIC 14 in line with the above facts and judgements, based on the present value of expected reductions in future contributions to the plan, the IAS 19 funded surplus of £1,955 million was reduced to a liability of nil. The closing position including unfunded liabilities is therefore £23.9 million. The table below summarises the effect of the valuation under IFRIC 14.

	31 March 2026	31 March 2025
	£’000	£’000
IAS 19 total closing assets	6,524,766	5,898,595
IAS 19 total closing liabilities	(4,569,904)	(4,188,973)
Net IAS 19 closing surplus/(deficit)	1,954,862	1,709,622
As IAS 19 shows a surplus, valuation basis adopts IFRIC 14:
Estimated benefit available as reduction in future contributions	–	–
Minimum funding requirement relating to past service	–	(447,409)
IAS 19 unfunded liabilities	(23,850)	(24,836)
IFRIC 14 closing surplus/(deficit)	(23,850)	(472,245)
Effect of the asset ceiling	(1,978,712)	(2,181,867)

The major assumptions used by the LGPS actuary were:

	31 March 2026	31 March 2025
	%	%
Rate of increase in salaries	4.50	3.55
Rate of increase for pensions in payment and deferred pensions	3.00	2.75
Discount rate	6.20	5.80

Mortality

Life expectancy is based on the Fund’s VitaCurves with improvements in line with the CMI 2025 model, with core parameterisation, initial adjustment of 0.25% and a long‑term rate of improvement of 1.5% per year for both males and females (2024‑25: life expectancy was based on the Fund’s VitaCurves with improvements in line with the CMI 2023 model, with a 15% weighting of 2023 (and 2022) data, a 0% weighting on 2021 and 2020 data, standard smoothing (Sk7), initial adjustment of 0.25% and a long‑term rate of improvement of 1.5% per year). Based on these assumptions, the average future life expectancies at age 65 are summarised below:

	Male	Female
Current pensioners	21.6 years	24.3 years
Future pensioners*	22.2 years	25.7 years

*Figures assume members aged 45 as at the last formal valuation date.

Movements in the LGPS defined benefit obligation during the year:

				31 March 2026				31 March 2025
	Fair value of plan assets	Present value of obligation	Impact of asset ceiling adjustment	Net pension position	Fair value of plan assets	Present value of obligation	Impact of asset ceiling adjustment	Net pension position
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Plan assets	5,898,595	–	–	5,898,595	5,618,264	–	–	5,618,264
Funded liabilities	–	(4,164,137)	–	(4,164,137)	–	(4,757,518)	–	(4,757,518)
Unfunded liabilities	–	(24,836)	–	(24,836)	–	(29,613)	–	(29,613)
Effect of the asset ceiling	–	–	(2,181,867)	(2,181,867)	–	–	(1,360,638)	(1,360,638)
Opening balance at 1 April	5,898,595	(4,188,973)	(2,181,867)	(472,245)	5,618,264	(4,787,131)	(1,360,638)	(529,505)
Current service costs	–	(90,355)	–	(90,355)	–	(123,523)	–	(123,523)
Past service costs (including curtailments)	–	(454)	–	(454)	–	(4,147)	–	(4,147)
Total current and past service costs	–	(90,809)	–	(90,809)	–	(127,670)	–	(127,670)
Net interest (cost) income	342,844	(240,439)	(126,459)	(24,054)	273,527	(231,604)	(65,991)	(24,068)
Net effect of business combinations and disposals	1,327	(1,341)	–	(14)	–	–	–	–
Remeasurements
Gain from change in financial assumptions	–	80,272	–	80,272	–	758,309	–	758,309
Gain from change in demographic assumptions	–	4,929	–	4,929	–	8,395	–	8,395
Experience gains/(losses)	(15,860)	(315,075)	–	(330,935)	–	45,976	–	45,976
Returns on plan assets, excluding amounts included in net interest	275,203	–	–	275,203	(44,645)	–	–	(44,645)
Gain/(loss) from change in the effect of asset ceiling under IFRIC 14	–	–	329,614	329,614	–	–	(755,238)	(755,238)
Total remeasurements	259,343	(229,874)	329,614	359,083	(44,645)	812,680	(755,238)	12,797
Cash flows
Participants’ contributions	47,800	(47,800)	–	–	45,994	(45,994)	–	–
Employer contributions	200,927	–	–	200,927	192,852	–	–	192,852
Contributions in respect of unfunded benefits	3,262	–	–	3,262	3,349	–	–	3,349
Benefit payments	(226,070)	226,070	–	–	(187,397)	187,397	–	–
Unfunded benefit paid	(3,262)	3,262	–	–	(3,349)	3,349	–	–
Closing balance at 31 March	6,524,766	(4,569,904)	(1,978,712)	(23,850)	5,898,595	(4,188,973)	(2,181,867)	(472,245)
Plan assets	6,524,766	–	–	6,524,766	5,898,595	–	–	5,898,595
Funded liabilities	–	(4,546,054)	–	(4,546,054)	–	(4,164,137)	–	(4,164,137)
Unfunded liabilities	–	(23,850)	–	(23,850)	–	(24,836)	–	(24,836)
Effect of the asset ceiling	–	–	(1,978,712)	(1,978,712)	–	–	(2,181,867)	(2,181,867)
Closing balance at 31 March	6,524,766	(4,569,904)	(1,978,712)	(23,850)	5,898,595	(4,188,973)	(2,181,867)	(472,245)

The plan assets in the LGPS were:

	Quoted price (in active markets)	Quoted price (not in active markets)	Value at 31 March 2026	Value as a percentage of total scheme assets at 31 March 2026	Value at 31 March 2025	Value as a percentage of total scheme assets at 31 March 2025
	£’000	£’000	£’000	%	£’000	%
Equity securities	2,490,855	–	2,490,855	38	2,236,454	38
Debt securities	690,991	–	690,991	11	691,947	12
Private equity	–	351,254	351,254	5	371,364	6
Property	–	391,205	391,205	6	307,784	5
Investment funds and unit trusts	1,092,752	1,286,063	2,378,815	37	2,111,331	36
Cash and cash equivalents	221,646	–	221,646	3	179,715	3
Total plan assets	4,496,244	2,028,522	6,524,766	100	5,898,595	100

Assets with a quoted price in active markets

Assets with a quoted price in an active market are valued at their market value or observable bid price quotations.

Private equity and investment funds and unit trusts without a quoted price in active markets

Due to the lack of a readily comparable market, the pensions scheme instructs investment managers to value unquoted equity, infrastructure and special opportunities portfolios in accordance with IFRS. The valuation basis may be any of quoted market prices, broker or dealer quotations, transaction price, third‑party transaction price, applying earnings multiples of comparable public companies to projected future cash flows, third‑party independent appraisals or pricing models. Many factors feed into the valuation including changes in interest rates and credit spreads, the operating cash flows and financial performance of the investments relative to budgets, trends within sectors and/or regions, underlying business models, expected exit timing and strategy and any specific rights or terms associated with the investment, such as conversion features and liquidation preferences. There is inherent estimation uncertainty in these valuations due to the nature of these calculations. The risk is reduced through the use of experts and ongoing review of the suitability of the estimates and assumptions made in the calculations.

Property

Investment properties are valued on the basis of open market value and market rent in accordance with the RICS Appraisal and Valuation Manual by chartered surveyors engaged by the pension scheme. Valuations were performed as at 31 December 2025 and subsequently adjusted for transactions undertaken between 1 January and 31 March 2026. While there is inherent estimation uncertainty, this is reduced by using independent experts with the relevant experience and qualifications to perform the valuations.

Sensitivity analysis

The actuary’s assessment of the impact on LGPS pension liabilities of increases and reductions in key actuarial assumptions is below:

		31 March 2026		31 March 2025
	Approximate monetary amount	Approximate increase to employer liability	Approximate monetary amount	Approximate increase to employer liability
	£000	%	£000	%
0.1% decrease in real discount rate	72,725	2	73,985	2
0.1% increase in the salary increase rate	3,174	–	3,144	–
0.1% increase in the pension increase rate	69,461	2	72,897	2

The principal demographic assumption is the mortality assumption (member life expectancy). For sensitivity purposes, we estimate that a one‑year increase in life expectancy would approximately increase the employer’s defined benefit obligation by around 3% to 5%. In practice, the actual cost of a one‑year increase in life expectancy will depend on the structure of the revised assumption (improvements to survival rates predominantly apply at younger or older ages). For 2025‑26, a one‑year increase in member life expectancy would increase the liability by 4% or £183 million (2024‑25: 4% or £168 million).

19. Financial instruments

Categories of financial instrument

Details of receivables, cash balances and payables can be found in Notes 10, 11 and 12.

Receivables comprise trade receivables, other receivables and accrued income that have fixed or determinable payments that are not quoted in an active market.

Receivables are assessed at each SoFP date and impaired where recoverability is in doubt.

HMPPS holds share investments of £0.32 million (31 March 2025: £0.25 million) in milk companies due to the milk‑producing prison farms run by HMPPS at HMP Usk. They are held as financial assets at fair value through profit and loss. Fair value is equal to market value at the reporting date, and the movement in the value of assets is recognised immediately in the SoCNE, as income or as an expense.

HMPPS has financial liabilities comprising PFI liabilities, finance lease liabilities, trade payables, other payables and accruals.

Financial liabilities are measured initially at fair value. Where the effect is material, estimated cash flows of financial liabilities are discounted.

Credit risk

HMPPS is exposed to minimal credit risk as loans and receivables are comprised of trade and other receivables. The maximum exposure to credit risk is the risk that arises from potential default of a debtor and is equal to the total amount of these outstanding. HMPPS manages its credit risk by undertaking background and credit checks prior to establishing a debtor relationship. HMPPS has no collateral to mitigate against credit risk.

Interest rate risk

HMPPS is not exposed to significant interest rate risk. Most of the cash balances carry nil or fixed interest rates.

Liquidity risk

HMPPS’ financial liabilities are trade payables, other payables, accruals and finance leases. It is unlikely that HMPPS will encounter difficulty in meeting its obligations associated with these liabilities, as it is financed by the MoJ, whose resources and capital are voted annually by Parliament.

Foreign currency risk

HMPPS undertakes few foreign currency transactions and is not exposed to significant exchange rate risk.

20. Related party transactions

HMPPS is an executive agency of the MoJ, which is regarded as a related party. During the year HMPPS has had material transactions with the MoJ and other entities for which the MoJ is regarded as the parent entity.

HMPPS has also had material transactions with a number of other government departments and central government bodies. The most significant of these transactions have been with HM Revenue and Customs, Home Office, Department for Work and Pensions and Cabinet Office: Civil Superannuation.

In accordance with the requirements of the FReM, these transactions have not been reported.

No board member, key manager or other related party has undertaken any material transactions with HMPPS during the year. Compensation paid to management, including taxable benefits, is disclosed in the remuneration and staff report.

21. Events after the reporting period

In accordance with the requirements of IAS 10, events after the reporting period are considered up to the date on which the accounts are authorised for issue. This is interpreted as the date of the certificate and report of the Comptroller and Auditor General.

Annex A – Off‑payroll engagements

Highly paid off‑payroll worker engagements as at 31 March 2026, earning £245 per day or greater.

	Number
Number of existing engagements as of 31 March 2026	8
Of which:
Number that have existed for less than one year at time of reporting	5
Number that have existed for between one and two years at time of reporting	–
Number that have existed for between two and three years at time of reporting	1
Number that have existed for between three and four years at time of reporting	1
Number that have existed for four or more years at time of reporting	1

All highly paid off‑payroll workers engaged at any point during the year ended 31 March 2026, earning £245 per day or greater.

	Number
Number of temporary off‑payroll workers engaged during the year ended 31 March 2026	12
Of which:
Not subject to off‑payroll legislation	9
Subject to off‑payroll legislation and determined as in‑scope of IR35	–
Subject to off‑payroll legislation and determined as out‑of‑scope of IR35	3
Number of engagements reassessed for compliance or assurance purposes during the year	1
Of which: Number of engagements that saw a change to IR35 status following review	–

For any off‑payroll engagements of board members and/or senior officials with significant financial responsibility, between 1 April 2025 and 31 March 2026.

	Number
Number of off‑payroll engagements of board members and/or senior officials with significant financial responsibility during the financial year	–
Total number of individuals on payroll and off payroll that have been deemed ‘board members and/or senior officials with significant financial responsibility’ during the financial year – includes both on‑payroll and off‑payroll engagements	14

1. Using a reasonable alternative assumption, it has been assumed that an increase of 50% of capex has been included in the valuations. Note that the calculated amounts for change related to capex is calculated at a high level, comparing desktop and actual figures, which provides a result that is not in our opinion sufficiently robust as it does not consider other factors that might affect the valuations. The value of the estate could be up to 2.8% or £240 million higher under this scenario. ↩

2. The movement in the BCIS All In TPI, which tracks contractors’ construction pricing levels, is applied to the DRC valuations each year to reflect increased build costs. This estimate considers a change to TPI, where the actual TPI forecast figure is confirmed and there is a difference of +/- 2 points from the TPI level used in the valuation. ↩ ↩²

3. This assumption considers the application of physical depreciation, which is directly related to the remaining lives. Here it has been moderated to 90% of the projection on the assumption that works undertaken across the estate have had a moderating effect on remaining lives. ↩

4. This assumption considers the impact of functional obsolescence. This is difficult to quantify as it is not readily possible to calculate an average addition, but for this test 15% is assumed as an average (based upon experience and empirical evidence) and this is varied by 5% either way. The current value of the estate could be up to +/- 0.3% or +/- £24 million. ↩ ↩²

5. This assumption considers the impact of professional fee additions. This considers a 1% reduction in fee additions which would reduce the current value of the estate by -0.5% or -£41 million. ↩

6. Opening and closing balances include the life‑cycle value for annuities, which is separate from the extracted litigation provisions total. ↩

7. Department for Work and Pensions (2025), Retrospective actuarial confirmation of benefit changes, available at: https://www.gov.uk/government/news/retrospective–actuarial–confirmation–of–benefit–changes ↩

8. Department for Levelling Up, Housing and Communities (2023), Amendments to the Local Government Pension Scheme statutory underpin: government response, available at: https://www.gov.uk/government/consultations/local–government–pension–scheme–amendments–to–the–statutory–underpin/outcome/amendments–to–the–local–government–pension–scheme–statutory–underpin–government–response ↩