20th March, 2001 - Judicial Review, Day 5

Counsel for the Inland Revenue, Richard Plender QC, continued with objections to the PCG case against IR35. Yesterday, the Inland Revenue's desperate inability to produce credible independent evidence reached new depths when it emerged they had relied on a statement by a Mr Adam West of capedcrusader.com. The PCG tried to contact Mr Clark Kent of the Daily Planet for comment, but he was unavailable for interview.

After making a brief, half-hearted and unsuccessful attempt to convince the judge once again that companies do not compete with each other and the Inland Revenue IR35 Guidance Manual is a consistent and well-thought out piece of work, Plender moved on to the safer ground of legal arguments.

Plender spent the morning discussing the finer points of European law regarding Freedom of Movement. One of the main justifications for IR35 from the point of view of the Inland Revenue is that it is a general tax measure. They maintain that IR35 is not targeted at discouraging foreign businesses from coming to the UK. It may discourage companies from coming here because the business climate is less favourable, but this does not have a disproportional effect on foreign businesses seeking to come to the UK. Therefore, IR35 is not illegal. For example, Swedish income tax is comparatively high, but this is a feature of the Swedish tax system, not a deliberate barrier to discourage people from moving there. Therefore, this cannot be an obstacle to Freedom of Movement.

The Inland Revenue's case revolves around complex matters of law, and Plender continued speaking until 4pm, when he left the court to catch a plane. At this point, counsel for the PCG Gerald Barling QC rose to his feet to give the PCG's responses to the Inland Revenue. The Inland Revenue team now consisted only of the solicitors, who trickled away one by one during the course of the afternoon. The judge gave Plender permission to submit his response in writing by midday Friday 23 March. The judge would like to give a judgement some time next week. Before leaving, Plender indicated that the Inland Revenue are not seeking referral to Europe as they would not want to prolong the uncertainty for contractors.

After Plender left, counsel for the PCG, Gerald Barling QC, responded on behalf of the PCG. Barling suggested, that if the judge was uncertain about certain points, he could consider referring to Europe.

The two key arguments are specificity in relation to state aid, and what constitutes an "obstacle" to freedom of movement. The points of fact appear to have all been found in the PCG's favour, which has vindicated our position, the case will now come down to these two points of law, which are far more technical.

However, PCG has sought consultation with the elected representatives for the past two years. The arguments that we sought to present to the Revenue have at last been aired before an impartial authoritative body and our concerns have finally been recognised. It is likely the judgement will be made next week.

The PCG is posting detailed reports online after each session:

http://www.ir35update.co.uk

and is storing the archives of these reports on the forum notice board.

Susie Hughes
(Head of Executive Services)

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