IT contractors have been warned that the penalties for being found inside of IR35 tax legislation can be extremely heavy.

This particular piece of tax code can be a great source of stress and frustration for IT contractors, who can be forced to pay much higher tax and National Insurance contributions when found to be inside it, according to Contractor Calculator.

The Office for Tax Simplification is currently reviewing the IR35 tax code, along with the rest of what chancellor George Osborne termed the UK's "spaghetti bowl" of tax legislation.

However, even after the legislation is replaced, IT contractors can still be penalised under HMRC's current strict rules governing contracts under IR35.

IT contractors can be fined up to 100 per cent of their unpaid tax if they are deemed to have deliberately tried to dodge IR35 legislation.

"Penalties can be costly, time consuming and stressful for contractors, particularly if the case is taken to a tax tribunal and the courts," the website notes.