A High Court battle between an IT consultant and the Inland Revenue over IR35 shows that confusion over the tax rules still exists, critics of the measure have said.
The Professional Contractors Group (PCG) backed Gordon Stutchbury, who runs IT consultancy Synaptek, in his appeal against a tax commissioner ruling that he must pay tax as a 'disguised employee' of his client, EDS.
IR35 allows the Inland Revenue to treat some freelancers or contractors operating through their own limited companies as disguised employees rather than genuine businesses, for tax and National Insurance purposes.
Stutchbury said that under IR35 he had to pay over 50 per cent of his company's turnover in tax.
The case ended on Friday, and the judge Mr. Justice Hart will make a written judgement by the end of the month.
Dave Smith of Accountax, part of the PCG team handling the case, told vnunet.com that, whatever the result: "It won't draw a line under IR35. No one can make IR35 go away. It is on the statute book."
Smith said the case, which is the first individual case on IR35 to come before the High Court, might clarify some issues.
"We are looking for some principles and universal guidance but it won't stop people or the Inland Revenue contesting individual cases," he said.
Ex-policeman Stutchbury said: "I'm no longer able to run a business with the uncertainty IR35 brings, and now I am even more convinced that nobody should have to go through this."
After the case PCG spokesman David Ramsden said: "This case illustrates the confusion that still persists, three years after IR35 came into force."We would urge the Inland Revenue to work with freelancers to bring greater clarity to this area of law."
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