IR35 threatens glut of legal cases

Having had its appeal rejected, the PCG vowed to continue fighting against the tax. It had argued that its members, who are primarily small independent contractors, should be treated as such and not as employees for taxation purposes.

IT managers are likely to face significant challenges in attempting to clarify whether their staff would be regarded as employees or contractors, explained John Salmon, partner at law firm Masons. “The situation is unclear at present,” he said. “No one knows for certain how the rules will be applied.”

More details of test cases against IR35 are now expected to emerge at the end of this month.

Having lost the appeal, the PCG is hoping that it will be able to establish a precedent in law by successfully demonstrating that its members operate as contractors.

‘We will drive test cases through the court which demonstrate that our working practices are those of genuine businesses,’ said Jane Akshar, chairman of the PCG.

Other legal experts, including Cherie Booth QC, have called for legislation clearing up the definitions of who is entitled to employment rights.

PCG press officer Susie Hughes maintained that it would be identifying test cases over the next year. “We have still got money in the fighting fund. We are identifying suitable cases where case law is unclear, and they are typical of how our members operate,” she said.

The PCG had been seeking to overturn the introduction of IR35, which prevents individuals paying less in tax by claiming that they are contractors rather than employees. The Court of Appeal rejected the arguments in late December.

Lord Justice Robert Walker advised the PCG that it could continue to lobby the government to repeal IR35, but that the case will not be referred to the European Courts of Justice.

Links IR35 resource centre

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