On Monday morning, the judge ruled that IR35 should remain in place when he dismissed the Professional Contractors Group’s application to have the controversial tax rules abolished. But PCG activists later said that although they would have like the regulations wiped out, they were pleased with many of the recommendations the judge made.
Describing parts of the ruling as a ‘personal blow’, Portillo said Justice Burton had established facts in the case and found that the rules ‘created uncertainty for contractors’.
‘Labour like talking about the new economy, but their stealth taxes have undermined it,’ said Portillo, who said were the Tories elected, he would repeal IR35.
Call for amnesty
Meanwhile, mid-tier firm PKF called for the government to grant an amnesty on interest and penalties for 2000/01 for one-man businesses caught up in the confusion of IR35 in the light of the ruling.
‘Against the background of confusion and ignorance about IR35, the government should announce an amnesty to allow more time for businesses caught by the legislation to seek clarification of their position,’ said Mike Evans, PKF’s remuneration and benefits director.
The Institute of Directors joined the barage of criticism against the government. Head of the Policy Unit at the IOD, Richard Baron, said the government could have avoided a lot of hostility if it had started with a measure that was better designed.
Need for boundary
Baron called for a clear, well-founded and business-friendly boundary between employment and self-employment.
‘If people wish to do business as genuine independent contractors, without all the baggage of employment law and PAYE, they must be able to do so and must know where they stand,’ he said.
He also spared a thought for the Inland Revenue.
‘The Revenue did their best to produce good guidance, but it is hard to do for such ill-targeted law.’
As for the Inland Revenue itself, a spokesperson was incredulous at some of the PCG’s claims. When told the PCG said the judge concurred with it on every finding of fact, he questioned how this could be so when he found in the Revenue’s favour.
In its official statement, the government blamed any lingering uncertainty at the door of the PCG for brining the case in the first place. It said it was glad the court had confirmed that the IR35 legislation is not contrary to EC and Human Rights law, and that the uncertainty caused by this case can now come to end.
‘IR35 legislation remains the law of the land. The Inland Revenue will police compliance with this legislation in the same way it polices all other tax and NICs legislation.’
And from the acclaimed expert…
From the accountancy profession, IR35 expert Ann Redston said: ‘Contractors are going to be very disappointed because they had high hopes.’
But she offered an olive branch suggesting that some changes were likely in the way in which the Revenue manages IR35 as a result of the case.
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