Revenue confirms years ahead without case law

In a letter to a contractor the Inland Revenue has confirmed that no case law exists in relation to IR35 and that it needs to be established.

However, with the appeal process, this could mean up to five years before case law reflects the way the modern economy works.

In a letter the inspector stated: "The existing rules are based on a long history of case law, but of course, none exists in relation to the new legislation. It is envisaged that IR35 will ultimately lead to new case law."

As a demonstration of how out of touch the rules are, the Inspector points out that the most common indicators of self-employment include:

the worker supplies materials, plant and heavy equipment needed for the job.

Exactly how a knowledge based business would be able to supply

"materials, plant or heavy machinery" is not explained.

Ministers were warned no IT and engineering contractors had worked under the self employed rules for close to 20 years and as such the rules had remained in a timewarp. At the time, the Professional Contractors Group told the Government that trying to use existing case law in relation to the knowledge based sector was like trying to 'weigh something with a ruler'.

Many commentators remarked that to inject this massive uncertainty into the knowledge economy at a time of stiff competition for scarce resources, would cause great damage to the UK. The lack of commercial experience of Ministers involved is considered by many to be a major factor in a measure predicted to result in the loss of thousands of highly skilled resources overseas.