PCG: New case law will defeat IR35

The battle against IR35 appears to be far from over, as the Professional Contractors Group and the Inland Revenue agree that new case law is needed

The Professional Contractors Group (PCG) has predicted that it can still save its members from the IR35 tax, despite Friday's defeat at the Court of Appeal.

Speaking to ZDNet UK shortly after the ruling, PCG chair Jane Akshar said that a series of test cases will be launched in 2002, in an attempt to establish case law relevant to IT contractors. The PCG is hopeful that, once it has been established in law how real-world technology companies use self-employed workers, legitimate firms should not be affected by IR35.

"These legal proceedings have been a case of Dickens meeting the IT contractors," Akshar said. "It's currently impossible for someone to judge whether they're going to be affected by IR35 by looking at the existing case law."

"With new case law, we're confident that we can get all our members out of IR35," she said.

There have been many complaints from IR35's critics that the current Inland Revenue guidelines are inappropriate for the technology sector. For example, under IR35 a contractor may not be defined as self-employed if he doesn't take his own tools to work -- quite a handicap for a freelance mainframe expert.

Akshar added that she believes the Inland Revenue also supports the creation of new case law. "They also want this mess cleared up, so that it's easier for their inspectors to collect revenue," she said. The Inland Revenue has agreed that new test cases will be brought before the courts soon.

In Friday's verdict, the Appeal Court Judges criticised the absence of relevant case law for IR35.

IR35 was introduced back in 1999, and was meant to stop the practice of people claiming self-employed status while working for one client as effectively a full-time employee.

The PCG brought a judicial review against the government over IR35, but lost in the High Court back in April. It appealed against this verdict, but this appeal has now also failed.

Despite today's defeat, Akshar is still upbeat. "Today's ruling isn't the knock-out blow we hoped for, but we're still hoping to win on points, through the new case law."

According to the PCG, contract workers could flee UK companies by the thousands if IR35 is left in place, heading to countries that do not have as heavy a tax burden.

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