The High Court’s judgement yesterday on IR35 tax regulations is a personal blow to chancellor Gordon Brown, according to shadow chancellor of the exchequer Michael Portillo.
The judge, Mr Justice Burton, ruled on Monday that IR35 should remain in place when he dismissed the Professional Contractors Group’s (PCG) application to have the controversial rules abolished.
But PCG activists later said that, although they would have liked the regulations wiped out, they were pleased with many of the recommendations made by the judge.
Portillo agreed, saying that 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,” he claimed. He added that if the Tories were elected, they would repeal IR35.
Mid-tier firm PKF, on the other hand, called for the government to grant an amnesty on interest and penalties for fiscal year 2000/01 for one-man businesses caught up in the confusion caused by 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 also joined the barage of criticism against the government. Head of the Policy Unit at the IOD, Richard Baron, said the authorities could have avoided a lot of hostility if they had designed the measure better. He 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. “The Revenue did their best to produce good guidance, but it is hard to do for such ill-targeted law.”
But the Inland Revenue was incredulous at some of the PCG’s claims. When told the PCG said the judge concurred with it on every finding of fact, a spokesman questioned how this could be so when he found in the Revenue’s favour.
In its official statement, the Government blamed any lingering uncertainty on the PCG for bringing the case in the first place. It said it was glad the court had confirmed that IR35 legislation was not contrary to EC and Human Rights law, and hoped the uncertainty caused by the case would 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,” the statement added.
Taken from this week’s Accountancy Age, published on Thursday 5 April
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