Audit change sparks IR35 tax penalty alarm.

The rise in the audit threshold means thousands of contractors subject to the hated IR35 tax rules are at risk of fines and interest charges because they are no longer getting professional advice about what they need to do.

Following the move by trade secretary Stephen Byers last year to increase the threshold from #350,000 to #1m, many contractors have cut ties with accountants who could have warned of the impending dangers of IR35.

The first tax year under IR35 comes to an end on 19 April. Experts warn contractors may not know they are subject to the new rules because they are no longer in contact with their former auditors. Contractors need to know if they are subject to IR35 in order to meet the right PAYE liabilities.

Chas Roy-Chowdhury, tax expert at ACCA, said: ‘Some of these contractors don’t have any contact with a qualified professional who can flag up IR35.

‘There are many small businesses who will be several years down the line before they know anything about the problem.’

He said small businesses who did not realise their liabilities under IR35 could end up paying penalties and interest charges if they failed to get good advice.

The Professional Contractors Group is continuing its campaign to overturn IR35. In October the PCG won leave for a judicial review which is expected to take place in the spring.

Meanwhile paymaster general Dawn Primarolo has denied the introduction of the tax measure is driving contractors abroad in search of work. Speaking in the House of Commons she said: ‘There is no evidence that significant numbers of consultants are moving overseas.’

The Professional Contractors Group’s website is at’s IR35 resource centre is at

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