Scales of justice tip towards contractors

IT contractors could be freed from the shackles of IR35 tax legislation following encouraging signs in the ongoing judicial review.

Kevin Barrow, a partner in IT law firm Tarlo Lyons, said the crucial point concerned general employment law. "If contractors are subjected to IR35 because they pass common law employment tests, they have employment rights too.

This could spell disaster for firms using contractors, which would have to pay them sick pay, holiday pay and match permanent staff's benefits.

The Professional Contractors Group (PCG), which brought the legal challenge, said that comments made by Judge Michael Burton QC may also indicate that the scales are tipping in favour of the contractors.

"The judge has understood the logic behind our case," explained Gareth Williams, chairman of the PCG. But he warned contractors not to break open the bubbly just yet. "The Inland Revenue hasn't begun to present its case yet and I wouldn't want to pre-empt the judge's decision," he said.