The Inland Revenue is confident it can fight off all attempts to prove the IR35 tax illegal, head of the Inland Revenue Nick Montagu has said.

Since IR35 was introduced in April 2000, the Professional Contractors’ Group (PCG), an IT contractors’ lobby, has been fighting a campaign against the tax, claiming that it contravenes European law. After it lost on appeal in the High Court, the PCG said it would continue fighting the tax through case law.

‘I’m not concerned about these attempts at all,’ Montagu told Accounting Technician magazine. ‘We’re on solid ground. There was a loophole there. Parliament decided to close the loophole in the Finance Act, and we’ve been upheld in two courts. I’m not worried by this.’

Montagu admitted that the IR35 guidelines needed clarification. ‘The actual guidelines on IR35 were right – that’s why the tax was upheld in both judicial review and appeal. But the way in which we present them did need a bit of relaxing.’

He defended the accusation of Justice Burton that the Revenue had been ‘inflexible’ in some respects. ‘If it is the law, we are right to be inflexible,’ said Montagu.

In March, the Revenue announced it would introduce a number of employee-style benefits and concessions for those falling under IR35. Those who work under IR35 will now be entitled to business mileage and to claim other expenses in the same way as any service company. These amendments took effect with the new tax year on 6 April.

IR35 affects contractors who, the Revenue claimed, enjoyed limited company National Insurance contributions and tax status while effectively working as full-time employees.