At a High Court hearing this week representatives of IT contractors will argue that IR35 is unfair because it treats self-employed IT workers as company employees for tax and national insurance purposes.
During the three-day hearing the Professional Contractors Group (PCG) will state that IR35 breaches European legislation and should be repealed.
The Inland Revenue is set to fight the case. In a statement it said, "This is a general tax measure that was brought in to address a tax-avoidance device that was well known and occurred throughout the UK."
If the PCG fails to get IR35 overturned, it could hit skills levels. "IR35 fails to provide tax breaks for training," said Kevin Barrow of IT law firm Tarlo Lyons. "The sector relies on highly-trained mobile knowledge workers. It needs incentives for training and it should be possible to set training costs against tax."