The IR35 Consultation Group is a non-profit making company set up to lobby on behalf of the FTSE top 100 companies and Recruitment Agencies.  

72% of the FTSE top 100 companies surveyed by 3 sixty group (for IR35 Consultation Group) did not support the Inland Revenue in their belief that End-Users want Contractors to move back to Permanent Employment

It is currently possible for a permanent employee to leave a company on a Friday to return on Monday doing exactly the same job but indirectly engaged as a "consultant", paying reduced tax and national insurance. This reduction is caused by the majority of income being drawn from the company in the form of dividends and paying little or no salary at all, thus avoiding Employer’s and Employee’s national insurance. 

The Government is going to bring forward legislation to tackle this sort of avoidance. They estimate that this is currently costing them £475m per year in lost revenue.

Latest News

02/04/01  Read the latest IR35 News Update from 3 sixty group

IR35 Judicial Review Result                                  

Following vibrant case presentations from both sides, the Judge (Mr Justice Burton) today concluded that the Inland Revenue had not acted improperly in applying IR35 measures to counter tax avoidance.  Furthermore, the he confirmed that it was neither a breach of Human Rights, nor a cause of restriction of free movement within the EC.

 A spokesperson for the Inland Revenue stated, “the Judge has seen in our [IR] favour in all points of Law”.  They went on to say that IR35 legislation is in place and they will apply, monitor and police the legislation in line with their normal practice.

 Whilst the Judge did single out several areas within the Employment Status Manual for clarification, there appeared to be little in the judgement to change either the process of assessment or the application of fines or penalties for incorrect or late payments.  The industry awaits the Inland Revenue interpretation of the guidance given by the Judge.  Many IR35 commentators have suggested the amended rules adopted by the Inland Revenue last year moved the impact of the legislation sufficiently to make it robust and sustainable to challenge in law.

 Although the result of the Judicial Review might not be the one Contractors would have hoped for, it has allowed the Inland Revenue to eliminate a degree of confusion within the UK IT Industry and verify the approach to be adopted.  Contractors will now be required to submit their IR35 payments before 19^th April 2001 otherwise they face interest charges on any undeclared or under-declared payments.  The Inland Revenue issued an update on their web site today stating:

The Government is glad that the High Court has confirmed that the IR35 legislation is not contrary to EC and Human Rights law, and that the uncertainty caused by this case can now come to an end. The legislation was necessary to ensure fair taxation of all workers, whether or not they use a limited company to arrange their contracts.

What happens now?

The IR35 legislation is the law of the land, as enacted by Parliament and upheld by the Court. Individuals affected by it will need to make sure they take the necessary actions to ensure they comply with their obligations under this law.

What do workers affected by IR35 need to do now?

Workers affected by IR35 will need to:

Whilst the judgment has confirmed the current position, there continues a need to negotiate with the Inland Revenue to expand the allowable schedule D expenses from 5% to a level which encourages both entrepreneurial and business building activities.  Furthermore 3 sixty group will continue to press for expansion of expenses to include training as an allowable expense.

Contractors who are still uncertain of their status are advised to speak to their specialist advisors.  There is an engagement/contract tester on the 3 sixty group web site www.360-group.com/ir35 where Contractors can test their contracts and assess the likely status of their engagement.  The site also contains an IR35 Calculator that assists in the calculation of IR35 payments.  Please feel free to register on the web site for regular updates.

20/09/00  Read the latest IR35 News Update from 3 sixty group

Available in PDF and Word formats

29/08/00  The Finance Act was finally approved on the 28^th July 2000 (This legislation is now contained in the Finance Act 2000, Section 60 and Schedule 12).

21/02/00 3 sixty group have issued a press release warning Contractors that they face financial penalties if they follow inaccurate advice regarding IR35.  This could result in the Contractor having to pay any unpaid Tax and National Insurance, interest on that money, a fine equal to the unpaid amount and a penalty of up to £3000.  Please read the Press Release which is available in two formats (MS Word) and (htm)

31/01/00 - 3 sixty group received the final guidance on the IR35 tests from the Inland Revenue.  Whilst there are no major surprises, the document confirms some of the key areas we have been highlighting to all sectors of the industry, including the fact that the majority of existing contracts do not truly reflect the work being done on site.  We continue to advise Contractors, Agencies and End Users and have been involved in an exhaustive round of briefing sessions.

The Inland Revenue state:

“The terms of contracts used by service company workers who obtain engagements through agencies tend to be of a standard form.  Such contracts typically require the worker to work on the client’s premises, use the client’s equipment, work standard hours, be paid at an hourly rate and be subject to a high level of control.  In such cases. the opinion of the IR about the engagement is likely to be that it would be employment.

Where a worker is engaged on this type of contract for a period of one month or more, and cannot demonstrate a recent history of work including engagements which have the characteristics of self-employment (…) we will say that the engagement would have been employment and therefore be covered by the new rules.  Where the contract is for less than a month, then, although the engagement may still have been one of employment, the status position will be considered on a case by case basis.”

As 3 sixty group have advised for some time, contracts need to reflect accurately the work being done on site and there will need to be significant review of current working practice.  Alternative models of contract do exist and they can have significant impact on both IR35 and the ‘professionalism’ of the industry as a whole.  Please contact us for details on 0845 20 20 360

The rules will be published by the Inland Revenue on 7 February 2000 however you can read them in the meantime here

19/01/00 - 3 sixty group have been hosting a series of meetings with end-users to discuss IR35 and the impact on UK businesses.  Many of FTSE top 100 companies have been involved and their feedback regarding the use of Contractors has been enlightening.  Full details of the outcome of these meetings will be published in due course.  

We await the final guidance/regulation from the Inland Revenue in order that we can give some definitive answers as the effects of the regulations.  This is due February 2000.

09/12/99 - 3 sixty group have issued a Latest News document explaining the current position on IR35, the tests of Self Employment and allowable Schedule E expenses - please register on the website and place the note Newsletter 991207 in the comments section.

25/11/99 - 3 sixty group met with the Inland Revenue this afternoon as part of the process of clarification for the Schedule D/E tests  

There were particular areas of interest in the discussions which will have an impact on the groups who will be considered "genuine Contractors".  Further information and guidance will be released after all the IR meetings are completed.

09/11/99 - The final obstacles were removed from the Welfare Reform and Pension Bill tonight and the Bill will now go forward for Royal Assent.  

This follows a day of rapid negotiation with the Lords who had successfully sent the Bill back to the Commons for MPs to look at the Disability elements once again.  The Minister refused to make any further changes.   Following a hasty vote in the Commons the Bill was immediately sent back to the Lords where Lord Ashley agreed to withdraw his objections (and alternative Amendments) and he sent the Bill forward with his blessing.

Download the latest Press Release

08/11/99 - 9.00pm IR35 received further discussion in the Lords tonight, with opposition speakers once again stating their concerns over the ill-thought out legislation.  Despite criticism from both Conservative and Lib Dem Peers, the new Amendments were withdrawn by the opposition and the Governments IR35 Amendments were allowed to remain in the Bill.  This was agreed with a reminder to Government that the issue would be re-addressed in the debate on the Finance Act 2000.

Download the Press Release

08/11/99 - 3.00pm The Government are currently reviewing the Commons Amendments to the Welfare Reform and Pensions Bill.  The lobbying has continued to ensure that the Lords are aware of the continued dissatisfaction of UK industry (via the 3 sixty group/IR35 Consultation Group) and Contractors (via PCG).  We will post the results of the debate as soon as they are available.

03/11/99 - The Government forced IR35 back into the Welfare Reform and Pensions Bill tonight.  The large majority and Government whips ignored a constructive debate and pushed this ill thought out legislation back into the Bill.  The debate goes back to the House of Lords and will debated on Monday 8th November 1999 .  

Download the Press Release

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13/10/99 - The Lords throw out Clause 71 (IR35 enabling powers) from the Welfare Reform and Pensions Bill.  Whilst this is not the end of the IR35 debate, as the Government can bring it back again in the Commons, it will focus the Government on our continued concerns over their failure to treat Contractors as genuine entrepreneurs.

Iain Sutherland and Brian Keegan have been involved in an arduous series of meeting with peers, MPs and Government Officials running up to the debate.  The meetings will continue as we demonstrate to Government the impact they could have on the UK's flexible working model.  "We continue the fight to prevent the worst effects of  'Cruel Britannia'" said Iain Sutherland in the latest 3 sixty Press Release

UPDATE 23/09/99 - The Inland Revenue have made their announcements (23/09/99).  Please download our update for the full text and guidance on what this means.

The negotiations continue and we will give you guidance and updates as they happen.

As part of the ongoing process of negotiation we encourage you to forward your comments on the revised proposals to Lord Higgins, who will lead to the Conservative response to the Welfare Reform and Pensions Bill in the Lords on 13 October 1999.

Comments to Lord Higgins can be sent to mailto:higginst@parliament.uk who has advised 3 sixty group that he encourages  readers of this site to send their comments.

IMPORTANT UPDATE   -    Amendments were put forward to Government on Friday 14/05/99, which were voted on in the Commons on Monday 17/05/99 - these showed the direction any likely proposals will take in the Finance Act 2000.  These amendments were part to the Welfare Reform and Pensions Bill.

The Positioning Statement issued by 3 sixty group on behalf of the IR35 Consultation Group Ltd was widely distributed to MP's and other interested bodies.  Details of the debate can be found on Hansard.   The vote went as we expected with the Amendments being passed into the Bill.   We were successful, however, in raising awareness of the issue.

Please read our press release of 11/05/99 for updates on the issues and effects of IR35.

Despite rumours to the contrary - IR35 Consultation Group is alive and well.  With a range of activity at all levels.   The latest press release about the IR35 Consultation Group clarifies the current activities of the Group and its industry leading profile.

Please feel free to download the IR35 Consultation Group Report (summary) which was submitted to the Inland Revenue as part of their discussions with interested groups.

The meetings with the Inland Revenue of interested groups on 10th and 11th June 1999 proved very interesting.

Those present highlighted a number of concerns over the IR35 proposals.  The Inland Revenue confirmed that they wish to listen to such comment and have read all of the submissions with interest.

The IR35 Consultation Group issued a press release confirming that the negotiation will go on and we still need all your comments.

The Welfare Reform and Pensions Bill passed through the Lords on 10th June 1999 with the Amendments relating to IR35 included.  This IR35 section of this legislation requires activation in the Finance Act 2000 before it has any effect - so the lobbying moves forward.

02/08/99 - The continued process of the House of Lords led to a detailed debate on IR35, which resulted in a commitment from the Labour spokesperson, Lord McIntosh, to further consultation with the interested groups.  Please read the latest 3 sixty group newsletter for information on the debate and IR35 Consultation Group activities.

There were amendments put forward by the Inland Revenue to Government on Friday 14/05/99 which were voted on in the Commons on Monday 17/05/99 - these showed the direction any likely proposals will take.  These amendments are part to the Welfare Reform and Pensions Bill.  The amendments were voted in on Monday and now go up to the House of Lords.

This Legislation is still only the secondary part of a set of mirroring legislation, and is reliant on the final wording of the Finance Act 2000.   The lobbying will continue both to the House of Lords and back to the Commons for the Finance Act 2000.