In yesterday’s budget Red Book, George Osborne announced plans to tackle avoidance through the use of personal service companies by “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”.
Whilst the measures are clearly intended to prevent senior executives (who would otherwise be employees) from avoiding tax obligations by routing their salaries through private companies, the IIM is concerned that – if poorly drawn – such legislation could severely impact interim managers who work at a senior level.
Interim managers are independent professionals each running their own small business and providing expert services to client organisations, as required: expertise on demand.
Interim management provides business agility in periods of uncertainty and change. However, interim executives operating at a senior level (perhaps an interim Managing Director guiding a company through a turnaround, or an interim Finance Director engaged to manage an acquisition) are often required to adopt responsibilities in their client firms that could position them – for a limited period – as “office holders/controlling persons”.
Said the IIM’s Director of Public Affairs, Tom Brass: “It is essential that these measures be very carefully drawn so that they rightly capture instances of abuse without depriving the economy of much needed flexibility and innovation. The IIM would welcome an opportunity to consult on these measures as they are drafted.”