The case was brought by the Professional Contractors Group (PCG) which was formed to campaign against the tax. It says IR35 means that many small companies, mainly in IT and engineering, are unable to operate on equal terms with their larger competitors since their turnover is treated as salary for tax and National Insurance Contribution (NIC) purposes. They are therefore, says the PCG, unable to make or retain profits, unable to allow business expenses such as training and equipment against tax and cannot invest for the future or plan to grow or develop.
The government argues that IR35 was a necessary introduction to close a loophole that allowed some people to avoid paying tax and NICs by operating through a personal service company.