The Professional Contractors Group (PCG) has abandoned plans to continue the judicial review of IR35 after failing to secure enough funds from its membership.
The lobbying group would have needed to appeal by 21 January if it were to carry on the fight after a hearing last month ruled that IR35 was legal.
The PCG told its members it needed at least £350,000 to fund individual test cases to establish a legal precedent, and a further £350,000 in pledges to continue the judicial review.
But although the PCG received "over £350,000" from its members by its deadline, the failure to raise sufficient funds to pursue both lines of attack has highlighted a potential rift among its 14,000-strong membership over the best way forward to fight the tax.
In an open letter to members, PCG founder Andy White urged them to back the judicial review and personally pledged £10,000 to the cause.
Denying that the impetus of the fight had dropped off, PCG press officer Susie Hughes said: "We had already decided we would pursue case law as a priority to build the goal posts, but would pursue a dual track strategy if we raised sufficient funds.
"But having lost the appeal twice we weren't going to put all our eggs into one basket. There's no way the Inland Revenue can admit the law is clear. We will identify a number of cases that best indicate the true nature of the industry.
"Case law belongs to cobblers: if you're building a brick wall it's fine, if you're building software it's not. It's in the interests of the Inland Revenue to work with us on this."
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