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The judicial review into the IR35 tax measure at the High Court finished yesterday at around 7pm. The case itself has stretched two days longer than originally planned, taking up Monday and Tuesday this week. The judge has gone away to deliberate and will announce his decision on the legality of IR35 some time next week.

The case has been extensively covered in the press and on the Internet, not least by the group bringing the action against the government - the Professional Contractors Group.

As a whole, the five days have seen the judge, Mr Justice Burton, criticise the Inland Revenue and accept the arguments put forward by the PCG. Among the most notable issues the judge raised were that it seemed illogical to tax personal service company consultants as employees (IR35' essential intention) if they didn't receive employee benefits (causing concerns that billions of pounds would have to be paid out by UK companies) and that he wasn't persuaded that contractors other than those in the IT industry were affected.

Following the first three days, when the PCG stated its case, the judge arrived on Monday morning with a list of eight queries - which may be the deciding factors in the case. These were:


  1. Is the effect and intent of IR35 to eliminate the avoidance of tax and NICs?
  2. Will many workers with personal service companies (PSCs) be required to pay more to the Inland Revenue?
  3. Roughly 80% of PSCs are in the sectors referred to in the relief sought
  4. PSCs will experience uncertainty as a result of confusion as to what will and won't fall under IR35
  5. PSCs will be in competition with those larger companies which remain unaffected by IR35
  6. Those unaffected by IR35 have an advantage in tax flexibility and time
  7. IR35 will make some of those PSCs leave the country and will stop others wanting to set up in the country
  8. IR35 may have effects on interstate trade.

The QC acting for the Inland Revenue asked point three to be reduced to two-thirds. He only disagreed with points four and five, and attempted to argue his reasoning behind this. The Judge seemed unswayed.

And so it looks as though the PCG has won its case on the impracticability of IR35. This, however, is very different from finding the measure illegal and having it struck down. The decision over whether IR35 is legal will be based on seemingly obscure points of law. It is far from clear that the PCG has proved its case in this respect, and the judge will be naturally wary of striking any legislation passed by Parliament.

PCG spokeswoman Susie Hughes summed up the PCG's feeling: "We are very pleased that we have been allowed to put this case to the High Court. We are also pleased that the Judge has recognised our concerns and made several findings of fact in our favour. Now it is a question of points of law."

The case has certainly provided some plenty of copy. The group contesting the law, the PCG - has had a member taking extensive notes of the whole case and posting them on the Internet.

In fact, the case and the PCG in general has shown the great power of the Internet when it comes to allow people to communicate and share information. The judge even made mention of the Internet reports on the last day - suggesting that the Inland Revenue's QC check them to see what he had missed (he had had to leave at 4pm to catch a plane).

Related Link

For all the information you could possibly want on the case, go here.

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