The controversial IR35 tax will be scrutinised by a senior court tomorrow (Tuesday), as contractors continue their fight to have the regulations repealed.
Pressure group, the Professional Contractors Group (PCG) will take its case to the Court of Appeal tomorrow. They argue that the changes made to the tax rules governing so-called disguised employees contravenes European legislation. IR35 constitutes illegal state aid, and is a barrier to free movement.
"Because IR35 means that large companies are taxed in a different and preferential way to small companies, we believe the government has acted impartially and illegally," said Susie Hughes, PCG spokeswoman.
"IR35 also makes it less likely that contractors from other parts of the European Union would move to the UK. This is a barrier to free movement."
In April, the High Court ruled against the PCG, but it remains confident that the Court of Appeal will back its case. "The High Court found in PCG's favour on so many factual issues that we felt it was only a small step to prove that not only is this law unfair and uncompetitive, it is also illegal," said Jane Akshar, PCG chairwoman.
IR35 is the name of the rules in the Finance Act 2000 which affect personal services companies. The government had argued that many people were avoiding paying additional tax and National Insurance contributions by claiming to be a contractor, when they were actually an employee.
The Appeal will last until 6 December. The Court of Appeal has the power to overturn the original judgement and strike down IR35 as contrary to EU law. It could dismiss the appeal, or it could refer the matter to the European Court of Justice for a ruling on the disputed points of EU law.
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