IT contractors have been warned that whatever legislation replaces the much-maligned IR35 code, it is unlikely they will be paying less tax.

The Office for Tax Simplification (OTS) was created by the chancellor George Osborne shortly after the collation government took office, in order to sort out what he described as a "spaghetti bowl" of tax rules in the UK.

IR35 is a sore point for many IT contractors, taking up large amounts of time and resulting in incorrect tax billings, according to Contractor Calculator.

However, the website points out that the new legislation must be revenue neutral - it must produce as much income as the previous code.

It notes: "The shackles of maintaining tax yields imposed by the government leaves the OTS with far fewer options.

"It is quite possible that OTS will propose a solution that will leave contractors even worse off than they have been under IR35."