IR35 – The History so far

“IR35” has now been in existence for over ten years and still it remains a constant concern for freelancers and contractors across the UK. In particular, it has become a notorious threat to those within the IT Consultancy industry. Its significant impact on small businesses led to the emergence of the Professional Contractor Group (PCG).

9 Mar 1999 IR35 measures announced

We were first introduced to the concept on 9 March 1999 when the Inland Revenue (now HM Revenue and Customs) published a press release detailing Gordon Brown’s plans to create legislation to “counter tax avoidance in the area of personal service provision”.

The reason for its implementation being that the Government were concerned that people were paying less tax and national insurance by virtue of working through a personal service company structure, whilst continuing to perform work in the same manner as an employee.

May 1999 Professional Contractor Group (PCG) is formed

PCG forms to combat IR35 proposals.

23 Sept 1999  Modified IR35 measures announced

A second press release by the Inland Revenue on 23 September 1999 confirmed their plans and provided details of their revised proposals.

In particular they set out details of plans to introduce a “deemed salary” tax arrangement and a concession of 5% expenses allowance for those caught by IR35.

Further to this, they also stated that the emphasis was on the service companies to maintain responsibility for “operating the legislation” not on their clients.

Nov 1999 IR35 passed through House of Commons

The Welfare Reforms and Pensions Bill (containing IR35) is passed through the House of Commons.

1 Feb 2000  Revenue published IR35 guidance

IR35 depends significantly on determining employment status. Final guidelines in relation to this were published by the Inland Revenue on 1 February 2000.

7 Apr 2000  IR35 becomes law

The Finance Bill published on 7 April 2000 contained clauses to ensure IR35 became law.

28 Jul 2000  Royal Ascent

The Finance Bill received parliamentary passage and received Royal Ascent on 28 July 2000. IR35 was applied retrospectively with effect from 6 April 2000, making the tax year ended 5 April 2001 the first applicable tax year.

Mar 2001  Judicial Review

Since implementation the IR35 legislation has been widely criticised by the CBI and ICAEW.

As mentioned above, PCG was formed to give small businesses a voice. They won a battle to subject IR35 to a judicial review. The Judicial Review hearing took place in March 2001.

2 Apr 2001  High Court Hearing

Following the Judicial Review hearing in March, it was follows up on 2 April 2001 in the High Court. The High Court dismissed PCG’s application.

Aug 2001  First IR35 cases loses

The first IR35 case loses: Battersby vs Campbell

21 Dec 2001  Judicial Review – Appeal

PCG launched an appeal which was dismissed on 21 December

Jan 2002  PCG drops legal battle

PCG decide to focus on individual cases and case law.

Oct 2002  First IR35 case won

The IR35 case is won: Lime IT vs Justin

Jan 2005  Tories propose abolishment of IR35

The Tories speak for the first time since its introduction, about the abolishment of IR35.

2005 – 2009 Various cases

Majority of these cases were lost by HMRC.

Mar 2010  Tories announce commitment to review IR35

PCG’s continual lobbying gains contractors a commitment from the Tories to conduct a review of IR35.

July 2010  OTS review of IR35

IR35 review promised by new Office of Tax Simplification (OTS).

Sep 2010  Amendments to IR35 unlikely until 2012

Experts say that IR35 is unlikely to see any amendments until April 2012 at the earliest.

By graeme on May 3, 2011

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