The Professional Contractors Group (PCG) this morning lost an appeal which challenged the legality of the controversial IR35 legislation. It has vowed to continue lobbying against the tax which treats small businesses in the knowledge-based sector as “disguised employees” for tax and National Insurance purposes.

The PCG was set up specifically to lobby against the tax which was announced after the March 1999 Budget. It sought judicial review to have the legislation wiped from the statute books, arguing that it was illegal under European law. The Court of Appeal today disagreed, as did the High Court before it, in April this year.

The PCG said this morning that it welcomes the comments from the judges which recognised that the tests facing knowledge-based workers dated from the 19th century and that the dividing line between employment and business for PCG members was “often debatable”. The 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 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."

"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."

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