IR35 explained

One of the most important legal rules for contractors and freelance worker is IR35, which affects the tax conditions for every contractor. This can be difficult to understand so here is a very basic explanation to help you to know where you stand.
IR35 is a rule brought in my the government to help bring the earnings of those who are self employed in line with those who are in full time permanent employment. It stops the self employed from being able to hide any employment and thus benefit unfairly from a reduction in tax when they may be earning the same as another person in permanent employment.
If you are working for just one company you will be deemed to be in permanent employment and be subject to the same guidelines as those who are employed, and thus pay along the same tax lines. The self employed tend to take a tax cut and a reduction in NI contributions because of the transitory nature of their work, but this can be abused. A person working for one company full time on the same wage as another may still end up taking home a lot more money simply because they call themselves a ‘contractor’.
If you work for an employer for a set amount of hours and are paid by the hour, week or month, work at the premises of your employer and have a boss you are still in permanent employer and thus not really self employed. This means your tax will be worked out based on the fact that you are ‘akin to employed’. If you work for yourself and have the final say in everything that happens with your workload, work for yourself alone and take responsibility for anything that happens in the business, including financial losses and gains, then you are a contractor and should benefit from the cut in tax as you are in a more vulnerable financial position than those safe under an employer.
It is important that you work out what your true position is when it comes to the Inland Revenue as they have the capability to claim tax back from you for up to 7 years, which can have a major impact on your financial situation should you be found out. It is not worth trying to hide your circumstances because should they be found out any kind of law breaking is punishable. As soon as you work out your situation, should you find that you have underpaid in tax you need to contact the Inland Revenue as soon as you can to get the best advice you can on the subject. The Citizen’s Advice Bureau can also be helpful and an internet search can help you find your nearest one.