Court of Appeal find against Small Businesses

The Professional Contractors Group vowed to continue to campaign against the so-called knowledge-tax, IR35, by increasing its pressure to drive through relevant case law and forge stronger links with clients and industry bodies.

The PCG welcomed the comments from the judges which recognised that the tests facing knowledge-based workers dated from the 19th century and the dividing line between employment and business for PCG members was ‘often debatable’. PCG has argued for more than two years that the tests its members had to use were the equivalent of 'using a rule to try to weigh something'.

Speaking on the steps of the Royal Courts of Justice in London immediately after the Court of Appeal had rejected the Group’s judicial review, PCG’s Chairman Jane Akshar said:

"The judicial review was one part of our overall strategy but was not the whole part. It represented one possible knock-out blow for this unfair legislation. The court has found that IR35 is not illegal, but that is not to say it is right or fair. Tens of thousands of small businesses have to try to operate with the uncertainty and unfairness of it and the PCG will continue to do all we can to remove this unfair burden on small business.

"For the past few months, we have been preparing to launch a series of legal test cases, which will establish case law where there is currently a vacuum. We will drive through case law which is relevant to the way knowledge-based businesses, such as IT and engineering, operate in the 21st century, rather than the ‘upstairs, downstairs’ rules which belong in the 19th century and are currently in use by the Inland Revenue.

"PCG was formed less than three years ago by small, knowledge-based businesses who wanted to prevent this Government destroying their businesses. They came together because they knew IR35 was stifling their chances to run and develop entrepreneurial businesses. IR35 was wrong then and it is still wrong now. The PCG has grown from a fledgling organisation to the fastest growing trade association in the country with more than 14,000 small businesses. These people are determined to continue to fight for their rights to run a small business.

"The PCG will continue to represent the interests of these businessmen and women in legal and commercial arrangements. We will drive test cases through the court which demonstrate beyond a shadow of doubt that our working practises are those of genuine businesses and I predict that within the next two years, IR35 will be a voluntary tax, as knowledge-based companies will be able to demonstrate with certainty that they are real businesses."

Counsel for PCG was Mr Gerald Barling QC and Miss Kelyn Bacon both of Brick Court Chambers. They were instructed by Tony Askham, head of litigation at Bond Pearce, Solicitors.

IR35 was announced in a press notice after the March 1999 Budget. It treats small businesses in the knowledge-based sector as ‘disguised employees’ for tax and NI purposes, thereby preventing them from operating on similar terms to their larger competitors.

Last update: Fri Dec 21 10:11:29 2001