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Tenth anniversary of IR35 rules, but no-one's celebrating

Published on Mar 9, 2009 |

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It is ten years to the day since the Government penned its now notorious 'IR35' press release from which the tax legislation takes its name. How IR35 came into being and why it is condemned by the contracting community.

Brief IR35 history

On 9th March 1999, The 'Inland Revenue' (now HMRC) published a press release which detailed the then-Chancellor's plans to create legislation to "counter avoidance in the area of personal service provision."

'IR35' became law in July 2000 via the Finance Act - with Schedule 12 containing details on IR35 itself.

The 'intermediaries legislation' as it is officially known, was drawn up to counter the alleged tax avoidance by people working via personal services companies to perform work in a manner more akin to that of a PAYE 'employees'.

The Professional Contractors Group, which formed a few months after the initial IR35 press release was published, has consistently fought against the tax legislation, even taking HMRC to judicial review in 2001.

Although unsuccessful in its judicial review, the PCG has been instrumental in helping protect contractors and freelancers against the financial impact of IR35, and has focused on establishing IR35 case law precedents.

You can read more details in our history of IR35 article.

IR35 still causing damage

The PCG points out that IR35 is still causing damage to the economy in many ways:

The Government has acknowledged that it is unable to fully implement IR35, and astonishingly in 1,462 of the 1,468 IR35 investigation cases known to PCG have resulted in no extra tax being owed

Contractor group condemns legislation

Unsurprisingly, on the ten year anniversary of the IR35 press release, the PCG has condemned this Government's failure to abolish the tax legislation.

Chris Bryce, PCG chairman, said:

"... In these times of economic difficulty, the Government should be doing everything it can to remove barriers to enterprise - this must include the abolition of IR35."

John Brazier, PCG's MD, added:

"IR35 remains one of Gordon Brown's most ill conceived tax laws.

"... Its continued presence on the statute book is an affront to the UK's 1.4 million freelancers who provide an invaluable flexibility and dynamism to the economy."