Brown criticised over IR35 as court condemns Revenue's 'Fridays to Mondays' label

TUESDAY APRIL 03 2001

Brown 'erred' over new IT tax

BY CLIVE MATHIESON

GORDON BROWN was criticised by the High Court yesterday for fuelling resentment among hundreds of thousands of information technology contractors targeted by a new tax. The High Court said that the introduction of the IR35 legislation had been insensitive and inadequately researched.

However, the court dismissed a legal challenge by thousands of independent contractors who argued that the measure was against European and British human rights law.

Justice Stanley Burton said that the Inland Revenue had incited hostility by suggesting that all one-person service companies in fields such as information technology and engineering were camouflaging long-term contracts with employers to pay less tax. The Revenue labelled the small service companies “Fridays to Mondays”, suggesting that workers returned as independent operators to what was, in effect, their old job on preferential tax rates.

The judge added, however, that it had been wrong to suggest that they were in

“disguised employment”. In his judgment after a five-day judicial review last month, Mr Justice Burton said: “It appears to me wholly regrettable and unnecessary that such colourful language was used in the first press release.”

Independent contractors, of whom there are an estimated 250,000 in the United

Kingdom, said that the court’s proposed guidelines represented a “moral victory”. The Professional Contractors Group, which lobbied for the review, was yesterday considering whether to appeal. The PCG was ordered to pay costs, which could total about £500,000.

Michael Portillo, Shadow Chancellor, said that the Tories would repeal IR35.