IR35 ruling could be restricted to IT professionals, High Court hears

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Financial Times; Mar 15, 2001

By PATRICK JENKINS

A judgment that found the new IR35 tax rules unlawful could be restricted to IT professionals, despite the wide range of other professional contractors who are affected by the rules for self-employed contractors, the High Court heard yesterday.

The judge, Mr Justice Burton, told the IR35 judicial review, brought against the Inland Revenue by the Professional Contractors' Group, that the PCG so far had not proved their case for all contractors.

In its main argument - that IR35 unfairly discriminates against one-person consultancy firms in competition against large consultancies - the PCG had so far presented evidence of how only IT contractors were disadvantaged by IR35, he said.

The PCG has around 12,000 members, more than 80 per cent of whom are IT contractors. A PCG spokesman said last night: "We're working now on widening the scope of that evidence tomorrow."

The IR35 rules, which came into force last April, affect an estimated 90,000 contractors, according to the Revenue. About half of those are in the IT sector, but many are engineers and there are also significant numbers in the construction and medical professions.

Accountants said if the PCG failed to produce evidence of discrimination outside the IT sector, the outcome would be messy and impossible to enforce. "If a ruling were restricted to the IT sector, you have the problem of how to define an IT professional. How does the Revenue respond to that?" said Anne Redston, a partner at Ernst & Young.

The review hearing is now to be extended until at least Monday in order for the Revenue's arguments to be heard. The Revenue's counsel, Richard Plender QC, and Mr Justice Burton said they had cleared their diaries for the early part of next week to help expedite a judgment.

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David Hopkins

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