|To a certain extent, this was a problem of the Government’s, or to be more accurate, Whitehall’s own making. Some senior public sector workers, as personified by Ed Lester, head of the Students Loans Company, had operated through their own limited companies as a means of reducing their tax and NICs liabilities.
Having been vilified in the media for allowing this practice, the Government wanted to be seen to be putting not only its own house, but everyone else’s too, in order. Some commentators thought that IR35 was already sufficient to address this, but in the Autumn Statement, the Government made it clear it was going to go further.
But although the aim is clear, the means is not. A statement in the Budget documentation confirms the Government’s intentions, but does not add much solid information to the debate.
Wedged between announcements about unauthorised unit trusts and inheritance tax loopholes, is paragraph 2.192 which says:
- IR35 – As announced at 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. (Finance Bill 2013)
Small is a curious turn of phrase here, but so long as it is small and perfectly formed it may not attract much criticism. However, the concern is, and always has been, that the targeting would be so wide or badly drafted that it would hit many legitimate freelancers who are integrated into an organisation as part of their services to the client.
Interim managers were quick to identify the potential pitfalls ahead. Interim Partners, who supply short term executive resources to companies claimed that the Government plans are an attack on the interim management and will harm businesses’ flexibility.
Doug Baird, Managing Director of Interim Partners said: "This is a very worrying development that could harm businesses’ ability to use flexible senior executives, such as interim CEOs and CFOs.
“Businesses are particularly reliant on the skills of interim managers and trouble-shooters at the moment because of the challenging economy. A flexible interim workforce is a huge benefit to UK businesses. Any changes that put this at risk are a bad idea.
“We’ll be reading through the fine print closely to see exactly what the Government plans to do and how it will affect senior interim managers.
“Senior interim managers should not be treated as payroll employees, because they just aren’t the same. Interims working at a senior, office holder level, are used by businesses to meet short term challenges with a very specific skillset that the business usually can’t access on the permanent market. Frankly, it’s ridiculous to think they should be taxed like permanent employees.”
As the dust settles and the significance of the measures for freelancers becomes a little clearer, Shout99 will be continuting its focused coverage with analysis from experts of the issues in the Budget (and the more important ones behind the Chancellors words) in our Political News.
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Susie Hughes © Shout99 2013