Employers and IT contractors risk criminal charges if they try to get around Inland Revenue tax rules by drawing up ‘IR35-friendly’ contracts according to silicon.com.
IR35 was introduced in 2000 to close a loophole which allowed IT contractors to effectively work as full-time employees of one of their clients, while being taxed at lower contractors' rates. Contractors body the Professional Contractors Group has already lost an appeal against the ruling as have individual contractors.
But employment law experts are warning that those who collude in designing contracts that give the impression the worker is a genuine contractor are breaking the law and face unlimited fines and a maximum of seven years in jail.
Kevin Barrows, partner at law firm Tarlo Lyons, said: “If the contract doesn’t reflect your company’s actual relationship with them and if you dress things up in a way that doesn’t reflect reality you are in danger of being guilty of a criminal offence.”
