PCG mounts legal challenge against IR35
On the day that the controversial IR35 legislation came into force (April 6), the Professional Contractors Group (PCG) announced it was challenging the Government in the courts to have the legislation struck down as unlawful under European law.
The PCG, which represents independent contractors has retained the services of Gerald Barling QC and will be filing a challenge in the courts against the Government early next month.
Gareth Williams, Chairman of the PCG, said: "IR35 makes independent consultants pay more tax and NI than their competitors - the large international consultancies - for doing the same work on the same terms, and in fact more tax than any other sector of business. It is unfair and disproportionate.
"Having taken top legal advice, we are confident that there are several points where we have a valid challenge under European law.
"It is an indication of the strength of feeling and injustice that a group of 8,000 individuals - the majority of whom voted for New Labour - are now forced to take the Government to court to protect their livelihoods".
As a member of the EU, the UK laws have to comply with European legislation. If they do not, they are invalid and will be struck down. A recent example is Lunn Poly who, using the same QC as the PCG, challenged the Finance Act 1997 as being contrary to European law and won the case on the basis that the tax differential part of the Act was unfair and invalid.
*The PCG is a not-for-profit organisation which was formed in May 1999 to campaign against the injustice of IR35. Its membership has grown to 8,000 and recently several hundred contractors have been joining each week.
*The Government's own assessment of the impact of IR35 is that 66,000 small businesses, primarily in the knowledge-based sector would close.
*IR35 would treat small knowledge-based businesses as if they were 'employees' for tax and NI purposes, though the contractors will get none of the advantages of employment.
*IR35 will only apply where the consultant owns more than five per cent of the shares in his company, so owner-workers are penalised while the larger consultancies, providing staff on identical terms, are unaffected.
PCG website