Government may ban interim managers

At least, that’s the implication of Paragraph 2.207 in the Budget red book:

Personal service companies and IR35  –  The Government will introduce a package of measures to tackle avoidance through the use of personal service companies and to make the IR35 legislation easier to understand for those who are genuinely in business. This will include:

  • strengthening up specialist compliance teams to tackle avoidance of employment income;
  • simplifying the way IR35 is administered; and
  • subject to consultation, requiring office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source by the organisation by which they are engaged. (Finance Bill 2013)

It may come as a surprise to self-employed consultants, interim managers and contractors to learn that they are not ‘genuinely in business’, especially when they have to go out and find new assignments after each one ends, but perhaps this reflects the ill-informed nature of the whole debate.

The impetus for this proposal started with a public sector fat-cat story about a civil servant avoiding his tax by working through a company. Of course, he wasn’t a civil servant, he was an interim manager on a fixed-term contract but by the time that detail had come to light no-one was listening. As with all witch-hunts, no-one is interested in the finer points. Anyone working for public sector organisations and charging fees was fair game.

So, true to form, the government is responding to tabloid outrage by ‘doing something’ and that something could well be a total ban on any interim managers working anywhere. A draconian solution to a problem that barely existed.

If the above wording comes into force, anyone in a role which is ‘integral to the running of an organisation’ would have to be on the payroll. You could argue that managers at all levels fall into that category and it would certainly include the top few tiers of any organisation. This would therefore effectively ban companies from getting interim managers in to cover senior roles. Even temporary managers would have to go onto the payroll.

As I’ve said before, there are good reasons for employing interim managers. They are used throughout all sectors because the arrangement works for the employers and the interims. Forcing companies and public bodies to put people on the payroll, and give them all the benefits and job security that goes with it, would just add to these organisations’ costs and administrative expenses.

Which is probably why it won’t happen. Companies and business groups of all sizes will kick up a fuss about this. The consultation will almost certainly tell the government to back off. Hopefully, that will help George and Danny to understand that interim managers can be useful to employers,  so it would be just as silly to impose this measure on public sector organisations.

This proposal is craven populist nonsense. It is a knee-jerk response to a very small problem. There are a few interims who have been in organisations for too long and who should be on the payroll but for most, these arrangements make perfect sense. For a government claiming to be against red-tape, restricting the use of interim managers would be a very stupid, and very unpopular, thing to do.

Hat Tip: Mervyn Dinnen for telling me about this. I’ve been way too busy to read much about the budget this past week.

Update: Prateek Buch pointed me to this piece from Lib Dem MP Lorely Burt which concludes:

Of course false self-employment should be tackled and the laws already exist to do so, but the contribution the overwhelming majority of legitimate freelancers make to the flexibility of the UK labour market and the economy as a whole should not be hampered.

At least someone on the government side can see beyond the screaming headlines.

Update 2: From John Brazier of PCG, “Stop Fighting Mythical Dragons George..” Couldn’t have put it better myself!

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5 Responses to Government may ban interim managers

  1. Pingback: Government may ban interim managers - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. Interesting as ever Rick!

    Wonder what you make of this – (http://www.libdemvoice.org/lorely-burt-mp-writes-freelancers-championing-and-protecting-the-little-guy-27865.html)

    if it’s referring to the same thing (my ignorance on such matters could easily fill a Red Book on its own…) then at least some members of the government are interested in protecting the freelancer but want to end the abuse that the tax system allows. whether this initiative is the way to do that is another matter of course!
    just wonder what you make of it!
    ta
    P

  3. Alan M says:

    This feels like finding a solution to a different problem … I agree that someone who is hired to be in charge of an organisation, such as student loans, on a multi-year contract shouldn’t operate from within a company (putting to one side whether the benefits are even vaguely as great as the press would have everyone believe) … but for those of us who work on 3-6 month contracts at best …

    http://blog.diverdiver.com/2012/03/how-do-freelancers-spend-their-time.html

    (if you’ll forgive the self-promotion)

  4. Interims are at the heart of this matter, and outcomes from the consultation could – potentially – be very damaging to the sector; we’re yet to see.

    I am all for naming and shaming those who do deliberately avoid tax, but this is not what interim management stands for. Interim managers bring a unique set of skills to an organisation, they are independent and flexible, and can be turned on and off to suit requirements. Forcing them on to the payroll could prove disastrous for all parties concerned. Doing so will not only damage the productivity of organisations who rely on the skills of contractors, but it could also seriously undermine the competitiveness of the UK’s flexible labour market. The IMA’s quarterly IPSOS Mori survey indicates that the interim management industry is worth £1.5 billion. It is essential for organisations (public and private sector) to have access to this talent, as we work towards economic recovery.

    The IR35 Forum, which the IMA’s parent body – the REC – sits on, has worked extremely hard in the past year to improve the administration of IR35, a tax rule whose uncertainty causes many concerns among legitimate interim managers and contractors. Bringing forward new legislation in this area risks replicating this uncertainty.

    Jason Atkinson, Chair of the Interim Management Association (IMA) – http://www.interimmanagement.uk.com/pages/home.aspx

  5. I have undertaken a number of interim contracts: interim contracts have been great for me and has shaped me as a HR professional. I have found my experiences invaluable, I have not carried the contracts out for tax relief purposes but because I enjoy working for different companies and sectors. However I do agree that there are people who are working on an interim basis but have been there for such a long time there is no difference between them and a permanent employee and I agree this needs to change. But banning all interim contracts is not the way to go, it would be interesting however to see how the public sector would cope.

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