The budget appears to be OK for business but what does it mean for the interim management sector? Following the Governments U-turn and decision to abandon the ‘controlling person’ proposals recently, most involved in the interim management world were expecting IR35 to feature in the budget. All we saw was a brief mention with a reference that ‘office holders’ will be affected by IR35. The main budget document briefly states that ”as announced in the Autumn Statement 2012, the Government will make a small amendment to the existing IR35 provisions to equalise the tax and NICs treatment of office holders, and put beyond doubt that the legislation applies to office holders for tax purposes” (2.192 of the Red Book).
It’s not much to go on and there doesn’t appear to be a legal definition of what an ‘office holder’ actually is. There is a judicial definition of ‘office’ that is referred to in HMRC’s status manual that states it’s a “permanent, substantive position which had an existence independent from the person who filled it, which went on and was filled in succession by successive holders.”
That’s all well and good but I still don’t see that this should affect Interim Executives operating through a limited company. When an organisation engages an interim executive to deliver a specific set of objectives or project for a short period of time with the agreement and expectation the individual will exit once the agreed objectives have been delivered, then this is not a permanent role, should not be on payroll and not treated by HMRC as if it were.
Perhaps clarity on timescales is a better way of dealing with those that are abusing a loophole rather than labelling them as if they were a long term ‘office holder’. Encouragement should be given to those that can help businesses on the road to recovery through short term help.
We seem to be in a similar place when ‘controlling person’ was being debated but just a different terminology. If IR35 legislation is amended to include limited company contractors acting as ‘office holders’ (Treasury guidelines state that ‘office holders’ are senior personnel occupying specific position at Director level), surely this can’t include those who are ‘office holders’ of their own company?
It doesn’t do much to help rejuvenate an already fragile economy. Organisations in both private and public sectors can gain some real value in a short period of time through the engagement of an interim executive where a permanent appointment might not be necessary or in the budget. As a result they might well be in a better position to invest in growth / product launches, contracts, M&A etc. which in turn creates more opportunity and jobs. Surely we need to continue developing and building the interim management market beyond the £1.5B it is worth today and encourage more talented individuals to a career where they impart their extensive skills and experience on organisations in need of change. We don’t need to risk losing new entrants (serious about embarking on a career as an interim) or the experienced practitioners either into permanent roles, retirement or worst still, overseas.