IT consultants Dragonfly Consultancy Ltd have failed in the latest round oftheir long-running test case battle over the IR35 provisions. A High Court judge dismissed the company's appeal against a decision passed down December last year by special commissioner Charles Hellier, who rejected its challenge to an April 2004 decision in respect of liability to national insurance contributions for the period between 6 April 2000 to 5 April 2003, and determinations of liability to PAYE income tax issued on 18 June 2004 in respect of the same period. The decision under challenge related to arrangements whereby Dragonfly indirectly provided the services of its sole director and 50% shareholder, Jonathan Bessell, to the AA group of companies during the relevant period. Bessell, an IT system tester, worked almost exclusively for the AA during the relevant period under an agency arrangement brokered by DPP International Ltd. Mr Justice Henderson said he was unable to accept the submission from Dragonfly's lawyers that the statutory reach of the IR35 legislation was confined to notional employees, and that the special commissioner's analysis was vitiated by his failure to consider the possibility that Bessell might have fallen into a third intermediate category of this nature. He said: 'I can see no reason why the special commissioner should have taken into account other possible categories of worker which exist only for the purposes of very specific and self contained statutory codes. 'I agree with counsel for HMRC that such categories only have meaning and relevance in the particular contexts in which they are found. 'In the context of IR35, the only distinction that matters is whether the notionalcontract would be a contract of service or not. 'Mr Hellier clearly had that distinction well in mind, and for the reasons which I have given I consider that his conclusion that Mr Bessell fell on the employment side of the line is unassailable.'