Curtain call: last chance for IR35?

The Professional Contractors Group (PCG) came into force when the UK government first announced its plans to introduce IR35.

The organisation's aim was to fight in the corner of contractors in an attempt to have this controversial piece of legislation thrown out. From the outset, the PCG claimed the government had failed to consult the people who would be most affected by the legislation - instead, the companies that stood to benefit most sat on its advisory committee, it said.

The PCG also contested the government's statistics - that 60,000 contractors will go out of business - vastly underestimated the effects of the law. It forecast the figure would be more like 300,000, with thousands more leaving the country.

The group had the heavyweight backing of the Institute of Chartered Accountants (ICAEW) and the Federation of Small Businesses, among others. In fact opposition reached such a strong level that when the Welfare Reforms and Pensions Bill, which contained the IR35 legislation, reached the House of Lords in September, it was thrown out.

However, the victory was short lived and paymaster general Dawn Primarolo maintained the IR35 tax laws is necessary to create a fairer tax regime.

Now the industry stands at a crossroads.

Since the legislation came into effect (on 6 April) there have been few signs the impact has been as drastic as the PCG predicted. However, it can be argued many contracts agreed before 6 April are still being worked out and until contractors pay their first tax and NICs under IR35 rules next year, the full effects won't be felt.

Some members of the PCG aren't willing to wait for that moment to arrive. The Group's latest move to seek a judicial review of IR35 under EU law demonstrates the continued feeling among contractors that they have been treated unjustly.

Make no mistake, this is a tough battle for the PCG to win. Betting on IR35 being overturned would appear reckless.

Whatever the outcome, a thorough examination of what the UK government considers to be a genuine contractor or a tax evader is essential - only through a final ruling can the IT industry and its dependants move forward with confidence.

Have your say by answering our silicon.com IR35 survey at
http://research.silicon.com/wi/p0011538/i.asp?l=0