- The Government, civil servants and the media should avoid a knee-jerk reaction to the debate surrounding the role of limited company contractors working within government departments and arms-length bodies.
- They should avoid branding all one-person limited companies as ‘employees attempting to avoid tax’.
Joint statement from:
- The Interim Management Association (IMA), the industry body representing UK interim management recruiters
- PCG, the association representing the UK’s freelance community
- The Institute of Interim Management (IIM), representing professional interim managers
- The Interim Hub, an online resource for interim managers
The organisations highlighted above urge Government to look carefully at how contractors are engaged in the public sector and avoid branding all one-person limited companies as ‘employees attempting to avoid tax’. Limited Company Contractors (LCCs) work in a variety of legitimate ways in both the public and private sector, and are often brought in to lead transformation and change, working on specific projects for short durations.
Firstly, however, it is essential to stress that where there is disguised employment or tax evasion, this must be stopped immediately and fully investigated by HMRC. The Government is right to look closely at how public servants are being remunerated, although any review of the tax arrangements of LCCs must not unfairly tarnish all one-person limited companies as avoiding tax. Not only is this a gross misrepresentation, it may well have the effect of damaging the image of government as a place for LCCs to work; potentially cutting off the talent pipeline of skilled workers with very niche skill sets not found in the wider civil service.
LCCs within government operate in a range of roles, including IT specialists, programme managers, change management specialists, financial management specialists and HR consultants, to name a few. Most work on specific projects for set durations, typically 6–12 months. Many brand themselves as interim managers but. above all, their purpose is to effect change and roll out processes which endure after they have moved on to a new project. They will not be seeking a permanent position and have made a conscious choice to establish their own professional practice – much like a legal or accountancy practice – providing specialist expertise on demand to a range and sequence of clients (both in the private and public sector)’.
By working as a limited company, contractors do not expect the benefits associated with a permanent employee such as holidays and sick leave. They cover their own business expenses, make their own pension contributions and are responsible for settling their own personal and company tax affairs.
At a time when all branches of government are dealing with uncertainty and change, one-person limited companies with specialist skill sets are essential for driving efficiencies and reform. A variety of government departments value that they can be flexibly deployed alongside existing teams to make an immediate impact. However, where there is insufficient understanding for the appropriate ways in which contractors can be utilised, this must be addressed as a critical management issue at the highest levels.
One-person businesses are a legitimate model and the labour market flexibility they provide is vital to the economic recovery of this country. They should be deployed strategically by leaders who understand the value they offer and the appropriate way to use them. Any government review should seek to root out misuse, but must not undermine the unique contribution one-person companies make to the public sector.
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.
Chair, Interim Management Association
Managing Director, PCG – The Voice of Freelancing
Ad van der Rest & Hilary Husbands
Co-Chairman, Institute of Interim Management
Charles Fowler (FCA)
Managing Director, The Interim Hub