Interim management profession threatened by regulations

The fat cats and tax cheats have a lot to answer for.

HM Treasury and HMRC are implementing regulations and proposing legislation to curtail off-payroll engagements in the public sector and to drive the tax treatment of senior interim managers into an ‘employee PAYE’ model. This is being done with the best of intentions – that of dealing with the fat cats and tax cheats exposed in the media in recent months, but the rudimentary regulations and tax treatments are catching and threatening the livelihood of professional interim managers and executives.

UPDATE: 18th April 2013

US Style Tax “Information Exchange” spreading to Europe

IR35 Officer proposals

UPDATE: 28th March 2013

The Finance Bill wording and explanatory notes are published. The IIM are examining the text.

Download: Finance Bill 2013 – IR35 Officer clause

UPDATE: 21st March 2013

The Budget Red Book fails to provide any answers about the ‘officer’ proposals.
We shall report further once we know more.

UPDATE: 22nd January 2013

Over Christmas, the Institute of Interim Management (IIM) has been looking at the detail of the Finance Bill 2013 which proposes changes to IR35. The Finance Bill 2013 runs to over 1,000 pages, but buried in there is this (summarised):

If you are an ‘office-holder’ then you are caught by IR35.

  • Whole bill: http://bit.ly/SSQgVN
  • Relevant section: http://bit.ly/WqxlRk

Elsewhere HMRC reference judicial statements that an ‘office holder’ is someone in a substantive position and that means a ‘post to which a person can be appointed, which he can vacate and to which a successor can be appointed.’ ‘It need not be capable of permanent or prolonged existence but it must have an endurance at least beyond the tenure of one [person].

  • HMRC – “Offices”: http://bit.ly/YlfgZU

On that face of it that might be fine, but how many of us have taken over from another interim? Only to fulfill the assignment in extenuating circumstances, but even so, under the current wording of the Finance Bill, you are an ‘office holder’.

Your contract is likely to contain a substitution clause confirming that the post may not be limited to only you. We again talk about an alternative specialist if you are unavailable, but again under the current wording of the Finance Bill, you are now an ‘office holder’.

Are you taking an Interim FD, HRD, CTO etc position? Will this position have a perm successor (even if differently scoped)? Yes, the ‘nature’ of the task in hand is different, you are focusing on transition, the perm successor will be more ‘Business As Usual’, but nevertheless, under the current wording of the Finance Bill, you are an ‘office holder’.

And if you are an office-holder you are caught by IR35, or so the Finance Bill says.

Whether HMRC intend to target interim managers and executives in this way or not (and we don’t believe that is their prime intent), it would be all too easy when is this is law to point at it and say ‘that’s what the law says’ and detonate your ‘outside of IR35 Limited Company status, regardless of whether you are a genuine business operating on your own behalf or not.

The IIM wish to see the wording of the Finance Bill tweaked to not ride roughshod over the interim profession and are responding to the Finance Bill consultation deadline (6th February) in writing and where possible in person.

If you wish to comment, please head over to the IIM’s LinkedIn group where this debate is also being held.

http://www.linkedin.com/groups?gid=2339933

For reference purposes, you may also wish to review the IIM’s work on the 2012 Controlling Persons proposals, which have now been abandoned by the government in favour of the new IR35 ‘office holder’ proposals.

 

The Controlling Persons Proposals

You can read the Treasury proposals here: Review of the tax arrangements of public sector appointees.
You can read the HMRC Consultation proposals here: The Taxation of Controlling Persons.
The Health Service Journal has published the leaked: Implementing the recommendations of the HMT review of tax arrangements.

To help protect our community from decimation, the Institute of Interim Management is promoting the following headlines and accompanying articles to stop these changes destroying our profession:

  • The professional livelihood of interim managers are threatened by plans in the Danny Alexander ‘off payroll tax’ review and HRMC ‘Controlling Persons’ consultation.
  • The proposals aim to address tax ‘gross offenders’ on the margins of the interim management community by ‘carpet-bombing’ everyone with over-regulation.
  • The Institute of Interim Management urge the Treasury and HMRC to not rush to judgment with ‘blanket’ measures, but to adopt a more business-aware approach.
  • Professional interim managers and executives greatly benefit UK plc. A more thoughtful approach to regulation will avoid decimating this valuable profession.


IIM short response

The IIM’s position is captured in our 2 page summary:

Interim profession threatened (2 page)
Full link: http://www.iim.org.uk/wp-content/uploads/Interim-profession-threatened-2-page.pdf
Bit.ly link: http://bit.ly/SxrGdl


IIM full response

A longer version outlines the case in much more detail. It is published we are delighted to say, in a version with a foreword by the IMA, with whom we are pleased to be collaborating.

Interim profession threatened (22 page) fw-IMA - with a foreword from the IMA and a short appendix.
Full link: http://www.iim.org.uk/wp-content/uploads/Interim-profession-threatened-22-page-fw-IMA.pdf
Bit.ly link: http://bit.ly/Tz9fmA


IIM response to HMRC Controlling Persons consultation

The IIM responded to the HMRC consultation and attended a consultation meeting with HMRC to make our profession’s case. As our response to the consultation is now ‘public record’, we link it here for your reference:

IIM Response to HMRC Controlling Persons Consultation
Full link: http://www.iim.org.uk/wp-content/uploads/IIM-Response-to-HMRC-Controlling-Persons-Consultation.pdf
Bit.ly link: http://bit.ly/Od9mAe


Public official response template

The IIM has also prepared a simple template that interim managers and executives might find convenient to use when writing to MPs, other officials or bodies about these proposals:

Threat to interim management template

For more information, or to help, contact co-Chairman Ad van der Rest on: moderator@iim.org.uk