How can I check that I comply with HMRC rules?

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I have worked as an IT contractor for many years. I recently received a letter from HM Revenue & Customs suggesting that I have failed to comply with IR35 tax rules on unpaid employment. I’m confident yes because I’ve received tax advice from my client, but I’m concerned about signing the attached certificate of my tax position. What steps can I take to verify that I’m fully compliant?

Karim Oualnan, partner in JMW Solicitors’ London office, says IR35 rules they are relevant if an entrepreneur or an “self-employed” worker provides services through his own corporation or through an intermediary to a client. If the contract falls under IR35, the individual will be regarded as an employee for tax purposes and will be required to pay National Insurance contributions and income tax to HMRC as part of the payroll. These rules are designed to counter tax avoidance by ensuring that any “disguised employee” pays the same tax as a payroll employee.

You should avoid relying on your client’s determination of your IR35 status. Whether innocent or intentional, your client could misstate your position and ultimately you are liable for your own tax. Additionally, if your client is classified as a “small business” in the private sector, you are a tax debtor and are responsible for determining your IR35 status.

It is imperative that you keep detailed records of your income and expenses to ensure you are paying the correct tax. Contractors must collect records by keeping an IR35 file for the duration of the contract.

HMRC employs a variety of tactics to ensure people pay the correct taxes. A push letter is a relatively recent tool, introduced as a preventative way to combat tax avoidance by reminding recipients to review their tax practices. Given that you have received one, there is a strong likelihood that HMRC suspects that you have incorrectly completed a tax return or fall under IR35 legislation.

A tax position certificate allows recipients to declare that their tax affairs are incorrect, correct, eligible for deduction or relief, or not subject to UK tax. This gives people a chance to rectify any issues with HMRC before it brings an official inquiry.

Determining whether your employment arrangement falls within or outside IR35 is complex and can be subject to interpretation. The first step you can take is to review the criteria used to determine this HMRC website. They include factors such as checking, whether you can be replaced, any obligation to give work, and any subsequent obligation to do the job.

The consequences of completing the certificate incorrectly can be significant, including penalties, interest, and even legal action, including civil or criminal investigations. Therefore, if you are unsure, it might be best not to sign the certificate.

You should consider seeking professional advice from a specialist, who can help you understand your obligations and whether your working arrangements fall under IR35. They can also help with any paperwork or documentation you may need to provide.

What are my rights in the event of dismissal?

There have been rumors of job losses at my tech company. I am 35 with a girlfriend who works as a teacher and we have no children. I have a meeting scheduled with my boss next week and I foresee bad news. How does redundancy work and how should I respond? Will it be as bad as often suggested?

Winckworth Sherwood partner Daniel Parker says while hearing about potential layoffs can be understandably distressing, it doesn’t inevitably mean you’ll lose your job. If that happens, you have entitlements in the UK that can help you financially close the gap to your next role.

In essence, a redundancy arises when the need for you to perform your role, in your location, decreases or ceases altogether. While it can be tough to challenge, it’s worth considering whether demand for your role has, in fact, declined. Similarly, if you feel you’ve been targeted for discriminatory reasons or because you made a complaint, it may be worth seeking legal advice.

In many cases, layoff proposals involve an employer choosing who they want to keep from a number of people in similar roles, such as software engineers. Such selection should be based on fair and objective scoring. If you score well, you may be told that you are no longer at risk and that your role is safe.

If you are singled out for possible redundancy, your employer should meet with you to discuss what the redundancy proposals mean to you, whether there are any alternatives available to being made redundant (such as internal vacancies), and what you will receive if made redundant. There may also be an element of collective consultation with the broader group of employees concerned, depending on the number of people made redundant.

Should your role be redundant, chances are you have some rights to help soften the blow. You will be eligible for termination of employment notice, which is often in your industry for one to six months. You may be asked to work that notice period, placed on garden leave or simply paid a lump sum instead.

If you have two years of service you will also be entitled to layoffs. The calculation takes into account your gross weekly wage, subject to a £643 cap this year, your length of service and your age. A handy calculator is available at gov.uk.

It’s fair to say that statutory severance payments aren’t terribly generous, but many tech employers offer discretionary enhanced packages. These vary, but could consist of a few months’ pay on top of your notice. In return, an employer generally expects you to sign a settlement agreement, confirming that you do not intend to make legal claims relating to your employment.

Also consider what will happen to any shares or other incentives. In the technology industry, employees are often offered potentially lucrative incentives that are paid out over a number of years. When leaving, it is common to give up some incentives that have not yet accrued, but those who are fired often receive preferential treatment.

The opinions in this column are intended for general informational purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not liable for any direct or indirect results arising from any reliance placed on the responses, including any loss, and exclude liability to the fullest extent.

Do you have a financial dilemma that you would like to look into from FT Money’s team of professional experts? Send your problem confidentially to yourquestions@ft.com.