The HMRC launched a press release on the 9th March 1999 detailing how they were going to close the loophole that allowed Contractors and Freelancers to avoid paying tax and national insurance on the majority of their income by using a personal service company (PSC), composite company or business partnerships. This release is commonly known as IR35 and was implemented in April 2000.

IR35 affects all Contractors that do not meet the restrictions and definitions as set out by the HMRC. For more information, and to check if you are affected by IR35 and to see some frequently asked questions please visit HMRC or for independent advice please contact Castlemaine Associates on 0870 778 0063 or visit www.castlemaine.co.uk

In simple terms IR35 allows the HMRC to tax contractors at the same rate as employees. It is important to ensure your contract is outside IR35 when running via a limited company or tax solution provider otherwise you could be inline for large back taxes and penalties.