High Court Rules Against Freelancer In IR35 Case

by Robin Pilgrim, LawAndTax-News.com, London

01 April 2003

The High Court's dismissal of an appeal by freelance IT consultant, Gordon Stutchbury against the Inland Revenue's ruling that he was a 'disguised employee' of one of his clients for tax purposes has been dubbed a 'bitter blow' for freelancers and small businesses in the UK.

Following an unsuccessful appeal to the Inland Revenue, Mr Stutchbury, supported by industry body the Professional Contractors Group (PCG), took his case before the General Commissioners, who decided that although he was 'in business on his own account', he should still have been subject to the IR35 rules, and therefore taxed on the basis of his gross revenue.

Mr Justice Hart, speaking in the High Court on Friday supported this conclusion, and observed that the number of hours worked by Mr Stutchbury for his client, the fixed duration of his contract, the small amount of risk borne by the consultant, and the fact that he worked alongside employees of EDS, and was subject to the company's rules were all factors in his decision to uphold the Inland Revenue's ruling.

'The relative weight to be given to the various factors...was a matter for the Commissioners,' he explained, continuing: 'It is not possible, in my judgement, to say that they were wrong in law in the conclusion at which they arrived.'

Speaking on Friday, spokesman for the PCG, David Ramsden announced that:

'This is a bitter blow for Britain's freelance community. After three years of confusion about IR35, we are no closer to knowing who's inside the legislation and who's outside.'

'We have always believed the government's assurance that genuine businesses are not affected by IR35 and we will work with the government to clarify the position. Clearly today's court ruling will be of great concern to small businesses throughout the country.'

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