IT contractors are to take legal action against the Government over tax reforms which they claim are threatening to drive skilled IT workers abroad.
The Professional Contractors Group, which represents around 8,000 freelancers has applied for a judicial review of the Government's decision to treat freelancers as employees for tax purposes.
The tax reforms, which came into force last week, could force up contract rates for employers, and may exacerbate the skills shortage by persuading contractors to seek work abroad, contractors claim.
The PCG claims that the reforms, known as IR35, are in breach of European competition law. "We have been to see leading counsel. They have told us that in their view we have a highly respectable case. And in their view the Government are in breach of European law," said David Ramsden, director of the group.
Ramsden said that a trickle of IT contractors had already left for work in continental Europe where companies are crying out for staff to work on the euro. The trickle may turn into a flood if legal action fails, he said.