What is IR35? IR35 is the UK tax law which means that if an employee works in the UK and is subject to UK social security and/or employment law requirements, that employee will be deemed to be self-employed and will be subject to taxation at a very high rate and often taxed at a higher rate than their ordinary self employed status.

From 7 April 2008, employees having employment rights under UK social security law will have to have those employment rights enforced by the HM Revenue & Customs (HMRC) for working practices and conduct. This includes their being required to work at their place of employment and is required to obtain permission to work from their employer. If you are self-employed your employment rights vary depending on the type of non-contractors work you are engaged in:

- Contractors (disguised self-employed) have a contract of service in which their employer is W54 or a contract of service and repayment of tax and national insurance contributions

- Part-time contractors and individuals who could be defined as self-employed but are engaged in a trade.

- Contractors who can't prove that they have a contract/contract of service.

The introduction of IR35 involvement has increased the number of people in employment whose employment has been disciplined such as fishing, construction, and domestic staff, to name but a few. In addition to full-time contract workers, there is now a whole sector of contractors that operating in either contract work or contract work and decline from a professional and voluntary employment status - they are known as " repertoire contractors".

Self-employed contractors do not have employment rights - a contractor must be registered as a self-employed, benefits staff, and must pay National Insurance as Income Tax. In essence, the contractor's relationship with the contractor should always be like a straight contract with no question as to the type of employment relationship there is. If however, the contractor is an employee then you are engaged in a contract of service and should be taxed on your earnings as is the case when a semi-employed or contractor begins a job - and then behaves in such a way as to avoid the liabilities associated with employment.

Can IR35 cause concern? IR35 is only a problem where one of several events transpires: The employment of a sub-contractor is not maintained throughout the contract of services - e.g. a subcontractor is paid at some stages but cannot be said to have employment,

- The sub-contractor accepts employment that cannot be regarded as permanent.

- The sub-contractor does not work under a contract of employment HM Revenue & Customs have stated that if a sub-contractor is required to pay tax and national insurance twice or even three times. Have you been taxed and found to be liable?

You should contact HM Revenue & Customs to check the status of your employment. You can also contact the tax office if you are in doubt. If you are in doubt we recommend getting a tax debt advisor such as our tax debt team who can provide assistance and help. An IR35 investigation is usually carried out by HM Revenue & Customs (HMRC) when a contractor has been earning their services without paying the contractor/s their due payment. It is all too easy with contractors to avoid tax by submersing into sub-contractors or using contractors to a contractual job. An IR35 investigation may sound complicated, however, it is not.

HMRC just wants sensible contractors who have sub-contracting and a valid contract to continue to receive their PAYE contributions and to register as an employee of the company that they subcontractor to. Workers within the definition of APR fail to pay tax as they are not genuine employees of the company that they work for. This has resulted in HMRC carrying out thousands of investigations into thousands of contractors and even letters with 'IR35' fines. HMRC says that they are concerned that some contractors are paying tax twice, not contributing to their PAYE, and not being liable for PAYE regulations.

This is why HMRC will now play tough with contractors who we believe may not be suited to full- Contractor status. The prioritized investigation is often carried out at the start of a fiscal year which is quickest in reach through the Auditreciation & Negotiation probable. After 18 months a final IR35 investigation which covers monitoring and unpaid VAT is carried out.