IR35 battle moves to the Court of Appeal

The government is facing a new challenge to IR35 after the Professional Contractors Group (PCG) announced on Tuesday that it is to take its fight against the tax to the Court of Appeals.

The PCG, a body which represents self-employed workers, is unhappy with the conclusion of a recent judicial review into IR35, which concluded that the government was not breaking European law by introducing the tax. Members of the PCG have raised enough money to fund an appeal against this ruling, and are insisting that IR35 is damaging the UK's high-tech sector.

"Our members decided to fund an appeal against the High Court decision because we believe we have a good case and we want to fight for our right to run small businesses," Jane Akshar, chairman of the PCG, said. "These people are hard-working businessmen and women whose businesses are being damaged and in some cases destroyed because of unfair treatment by the government," she claimed.

IR35 came into force in April 2000. It treats some contract workers as employees for tax and national insurance purposes.

The government has claimed in the past that IR35 was implemented in an attempt to stop the "Friday to Monday" syndrome -- a tax dodge where an employee resigns from a company only to carry on doing the same job, but employed as a contractor. By doing this, the employee pays a lower rate of income tax. Some companies favour this because it releases them from having to pay some benefits.

At the judicial review earlier this year, 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.

According to the PCG, thousands of self-employed IT workers have left the UK to work abroad -- which it claims could have a devastating effect on Britain's high-tech future.

Both the Conservative Party and the Liberal Democrats have opposed IR35.

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