An appeal by software consultant Gordon Stutchbury was dismissed by Mr Justice Hart.

Two years ago the High Court rejected Mr Stutchbury's claims that the change to the UK tax system was incompatible with European free trade laws and the Human Rights Act.

The tax was designed to crack down on people who were avoiding tax and National Insurance payments by operating through a personal company.

A spokesman for the Inland Revenue said it was pleased the ruling had gone in its favour.

"Our aim is to apply the law equally to each taxpayer."

More pressure

The Professional Contractors' Group, the lobby organisation that backed Mr Stutchbury, described the ruling as a bitter blow to small businesses.

"It is clearly disappointing," said Mr Stutchbury.

"As anyone who�s ever run a business knows, this sort of confusion adds to the pressures and uncertainties.