The pernicious effects of IR35 are bearing down on Interim Management contractors in the UK, according to Leigh Anderson, Managing Director at Bis Henderson Recruitment.
IR35, the HMRC’s reclassification of independent and self-employed contractors as employees, primarily to combat perceived tax avoidance, is burdening the recruitment process of interim managers.
“Certainly there have been abuses – but employed status is often quite inappropriate to the interim situation,” writes Anderson in a company statement.
According to Anderson, in the IMS report, 44% of interim managers say they are primarily involved in change or transformation management, a further 14% in the management of specific projects: these are not disguises for long-term continued employment.
Not only are costs (not just taxes and NI) increased for both parties, but also employment contracts often come with rights, obligations, and liabilities that neither party has any intention of exercising, said Anderson.
“HMRC definitions are unhelpful: a self-employed contractor can’t be an ‘officer’, often equated with ‘can’t have management authority’, although the exercise of that authority may be precisely why the interim has been brought in. HMRC rulings can be challenged, of course, but particularly in these times, most businesses (and from April the decision is for the client, not the interim), have better things to do than argue the toss with Revenue & Customs,” said Anderson.
For some interims and their potential clients, there is also the small matter of Brexit. Although much is still uncertain, it may be that there will be real difficulties deploying non-employee managers to work, for example, with subsidiaries or supply chain partners in EU countries or, vice-versa, to use EU nationals to bring relevant skills and expertise into the UK, although this type of skills transfer is surely an entirely predictable need if UK-EU supply chains are to survive and prosper, according to the Recruitment Firm head.
“Although the need for interim management has never been higher, this isn’t translating into appointments, threatening many interims’ own business models,” he said.
He points out that there is little government support with the Job Support Scheme only applying to workers on PAYE before the end of September. Self- employed Income Support doesn’t apply to those with annual profits above £50,000, nor to those who are trading as a personal company and reward themselves out of dividends.
“This is bad news for individual interims but perhaps, more importantly, it threatens the easy supply of the skills and expertise that UK plc badly needs to deploy,” said Anderson.
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