Date set for IR35 appeal

The Professional Contractors Group, which has been fighting the controversial tax rules governing IT contractors, now has a date for its appeal

A date for the Court of Appeal hearing over the IR35 tax rules has been set. The Professional Contractors Group, which has been fighting the controversial rules since they were first announced, will have its case heard on 4 December for three days.

The appeal, which has been funded by the membership of the PCG, will claim that IR35 contravenes European legislation on two counts -- illegal state aid and a barrier to free movement -- and therefore should be removed from the statute books.

Under the rules, which were introduced in April 2000, some specialist contractors now have to pay a higher rate of tax than their larger competitors -- 38 percent compared to 32 percent.

At the judicial review in March, the PCG claimed that IR35 constituted illegal state aid because self-employed workers would be disadvantaged compared to big consultancies when trying to win a contract. It also said that the tax was a barrier to free movement across the European Union, because similar legislation did not exist in other countries. The government denied both charges.

For a while, it looked as though the judge might rule that IT workers, but not other contractors, should be exempt.

IR35 looked set to become the most unlikely of political footballs in the run-up to the general election. Both opposition parties said they opposed the rules, but Labour still got in.

The Inland Revenue has now launched guidelines designed to end confusion about who is liable for the controversial IR35 contractors' tax, but critics say it does not fully address the difficulties of self-employed individuals.

The new leaflet, called IR2003, and a previous document issued by the Inland Revenue, called IR175 Supplying services through a limited company or partnership, has been criticised for not properly addressing the issue that many contractors operate on their own.

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