Court ruling ends IR35 uncertainty

Having had its appeal rejected, the PCG has 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.’

However, the Inland Revenue has expressed its delight at the verdict, claiming the ‘uncertainty’ caused by the case was now over.

An official Revenue statement read: ‘The government is pleased that the Court of Appeal has confirmed the judgement given in the High Court in April that the service company legislation is not contrary to European Community law. ‘The uncertainty caused by this case can now come to an end. The service company legislation was necessary to ensure fair taxation of all workers, whether or not they use a limited company to arrange their contracts.’

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

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