Staying abreast of the latest tax changes is not the only law interim managers and their clients need to consider. There is also the small matter of new regulations on fixed-term contracts, writes Sara Bean
Whether you are an HR practitioner involved in the recruitment of interim managers or are moving into an interim management role, there are a number of employment law and tax issues to keep in mind before you sign that contract. These range from the thorny issue of IR35, to the Fixed Term Employee Regulations, which are expected in July.
When the infamous IR35 ruling from the Inland Revenue came into play in April 2000, no one had any idea how much impact it would have on the interim management market. Two years on and the picture is still not clear.
Explains Michael Deeks, incentives associate at international law firm Allen & Overy: "IR35 was introduced by the Inland Revenue because there was a perception that contractors, who would otherwise have been regarded as employees of clients, were operating through personal service companies to avoid national insurance contributions by paying themselves in dividends rather than salary."
The storms of protest from the IT industry, which has largely thrived on the use of IT contractors, and of interim managers and consultants against IR35 have so far been dismissed. At the end of last year, the Professional Contractors Group, which challenged IR35 all the way to the Court of Appeal, lost its case. So for the moment, at least, it looks like IR35 is here to stay.
Most interim managers continue to claim they are providing a consultancy service rather than fulfilling an employee's role, so are not applicable to IR35. In fact, according to a recent survey of registered interim managers at interim agency Impact Executives, 82 per cent of interim managers have registered their company as not applicable for IR35.
Says David Bradford, chief executive at Impact Executives: "Given the choice on the tax form, interim managers are choosing to register their company as not applicable for IR35. We have found that it hasn't had as dramatic effect as first suggested.
"There seems to be two reasons for this - interim managers tend to come in to do a particular assignment and/or