New challenges for Professional Interim Managers

12 September 2008

The current economic conditions are bringing opportunities for professional interim managers, says the Institute of Interim Management (IIM), and they should use their professional accreditation as a quality assurance for clients as more people enter the market for interim assignments.

 In its just-published newsletter, InterIM Insight, the Institute advises professional interim managers to be particularly careful to understand fully the implications of HMRC’s revised guidance on the need to register under the 2007 Money Laundering Regulations and also of the potential implications for their tax status under IR35 of HMRC’s victory in the High Court Case against Dragonfly Consulting Ltd.

The professional Interim Managers which the IIM represents provide a business-to-business service to clients and operate as independent businesses. Unlike part-time or temporary workers, professional interims carry total responsibility for tax, insurance and other statutory or regulatory requirements. The client relationship, whether direct or through an Interim Provider, is subject to commercial law and not employment law.  In a survey of members, 87% believed that the statutory and regulatory burden is increasing.  

Commenting on the UK’s current economic conditions, IIM Chairman Tom Brass writes: “UK plc is feeling the pain and inevitably is moving to a period where even the strongest companies will need to change to survive, the weaker ones will need the attentions of the turnaround specialists, and the weakest will probably go to the wall. Change of this nature brings opportunities for the Interim – in many respects Interim management is counter-cyclical, picking up the pieces on the way down, and providing resources as growth returns. And the risk?  As newly-redundant employees come onto the jobs market, the number of available ‘Interims’ will increase, with consequences for both daily rates and quality of service.  Members should make the professional accreditation of their Institute count!”

At the Institute’s AGM, Members emphasised the need for the IIM to work with the interim providers’ trade body, the Interim Management Association (IMA), to increase efforts to professionalise the sector across the board to meet these challenges.

Money Laundering Regulations

On the Money Laundering Regulations, the IIM was one of the professional institutions that made representations to HM Treasury about its earlier guidelines.  In the early part of 2008, a growing number of firms became aware that they potentially fell within the definition of Trust & Company Service Providers (TCSPs) in the Money Laundering Regulations 2007 (MLR), and would therefore come into this regulatory regime for the first time. Their concerns at this prospect centred on a belief that an onerous compliance regime was being put in place which was disproportionate to any benefit that might be derived by law enforcement agencies from suspicious activity reports made.

Following a flow of representations to HM Treasury on this, including by the Institute of Interim Management, HMRC announced towards the end of March that it was to update its “MLR 9 – Guide to Registration” to address this feedback.  HMRC has now published its revised guidance, in which it emerges that some Interims are still potentially affected by the MLR, specifically those who:

• Take on the role of director/company secretary at their clients and are therefore TCSPs
• Provide accounting services and/or tax advice (Accounting Services Providers (ASPs)).

However, under the new rules, not everyone falling into these categories needs to register.

IIM Chairman Tom Brass advises Interims: “If you may be in scope, you therefore must review MLR 9 carefully to see whether or not you actually need to register under these new rules to avoid incurring civil penalties.”  He adds that the significance of the new guidance is that – “although it is important to stress that the MLR themselves are unchanged - the MLR guidance stipulates that a person who can demonstrate that they acted (or failed to act) in the way they did as a result of following official (HM Treasury approved) guidance has a defence in law to the civil and criminal penalties which can be imposed under the MLR – and HMRC’s guidance is official guidance.”

“If therefore you believe you would be a TCSP or ASP under the MLR definitions, but you decide that you don’t need to register based on the HMRC guidance now issued, it would be as well to document that decision and the reason for it so that you can demonstrate reliance if needs be,” he warns.  “The registration rules are now, to say the least, complex, and you therefore should take independent professional advice if you are in any doubt.”

IR35

On the IR35 tax regime, the IIM advises professional interim managers to pay particular attention to the potential implications of the outcome of the High Court Case against Dragonfly Consulting Ltd.  The case, which was funded by the Professional Contractors Group, brought into close review the key aspects of many of the arguments hitherto used successfully to fend off suggestions by HMRC that a freelancer is self-employed rather than an employee of his/her client.

The IIM advises: “There is clearly much to digest as a result of this case, and any professional interim managers concerned that their contractual arrangements may be on the borderline in relation to IR35 should take urgent professional advice. The goalposts have been redefined more favourably for HMRC, and it is to be expected that they will take full advantage of this.”

The Institute of Interim Management (IIM) is the independent professional institute for Interim Managers - representing the interests of professional Interims, setting quality standards of accreditation, professional development and best practice, and promoting the development of Interim Management in the UK and internationally.

Full details of the IIM’s views on the above items can be found in its latest newsletter, available on-line at: www.iim.org.uk

Associated File: new-challenges.doc