Test cases will clarify IR35 regulations

Only a series of test cases will clarify how the IR35 tax regulations will work following a High Court ruling, say campaigners.

A High Court judge last week dismissed a legal attempt by the Professional Contractors' Group (PCG) to scrap the legislation, which claimed it discriminated against single-person consultancies.

IR35 remains as law, but the judge was critical of its implementation and recommended new guidelines. But despite PCG jubilation at the outcome, experts say the guidelines will not change the number of people affected by IR35.

Test cases would need co-operation between the PCG and the Inland Revenue to identify which areas need clarification. PCG deputy chairman Gareth Williams explained that the group had anticipated this and will be funding some cases on behalf of its members.

"Test cases would be very significant, because there is a vacuum of case law for our industry sector and we urgently need to clarify the legislation," he said. "We've had a head start from the judge's guidance, but some issues were not resolved and the only way will be by going to court."

An Inland Revenue spokesman said: "The idea of test cases comes from the other side. The High Court has clarified the rules and we will stick by them."

Ernst & Young tax advisor Anne Redston believes that it will be in the interests of the Inland Revenue to clear up what is currently a grey area.

"The next step should be a test case, or there will just be dozens of individual cases, but with none of them sufficiently comprehensive or decisive to move things along," she said.

Kevin Barrow, an employment lawyer at Tarlo Lyons, commented: "There will need to be multiple cases, all with slightly different facts, so different decisions will show how all the regulations work."

Also published in Computing