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Vague Rules on Contractors’ Tax

13 September, 2008

In September 2008 Anne Redston, a professor of tax law at Kings College, was reported as saying that areas around so-called ‘substitution’ clauses are still unclear following the Dragonfly case which had again tested the controversial IR35 rules.

While the outcome of the Dragonfly case had came as a disappointment to the freelance fraternity, it wasn’t a surprise. The judge had not changed anything, reported Redston. He had shone a much bright light on the substitution.

The IT consultancy Dragonfly had failed to overturn a tax demand for £99,000, since its contractual absolute right to substitution was not matched by the reality of the situation.

Ann Redston was quoted as saying that the case had highlighted that a more limited right to substitute an alternative would not get contractors past IR35 rules; they were all cases in grey areas, and that each time one of the cases went to court it drew the line more firmly in the sand for freelancers.

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