PCG Loses The IR35 Battle - For Now...

by Jason Gorringe, Tax-News.com, London

10 January 2002

Following its failure to defeat the UK's IR35 legislation at the Court of Appeals last month, the Professional Contractors Group (PCG) has vowed to continue fighting the good fight.

The PCG had claimed that the IR35 tax, which applies principally to small, knowledge-based businesses and professional contractors, is illegal under European law. They argued that it contravenes legislation on state aid and freedom of movement within the European Community. However, this plea was rejected by the three Court of Appeal judges, who also refused to refer the matter to the European Court of Justice or the House of Lords.

However, the judges were critical of the Inland Revenue's handling of the introduction and implementation of the tax. Mr Justice Burton condemned the IR35 rules as confusing and 'inflexible', and issued guidelines as to how they should be implemented.

Although speaking in late December, the PCG expressed confidence about winning the case, there were fears at the time that the speed with which the three judges reached their verdict did not bode well for the UK's self-employed taxpayers.

However, PCG Chairman Jane Akshar told reporters earlier this week that this latest appeal was only part of their strategy. She revealed that the organisation was preparing to launch a series of test cases to push through relevant case law. 'The court has found that IR35 is not illegal, but that is not to say that it is right or fair,' she explained.

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