A new ruling from the Inland Revenue, IR35, will have far-reaching implications for interim management professionals and their clients, By Caroline Horn
There are many reasons why a person should decide to become an interim manager, just as there are many ways in which they can go about doing so. How they operate - whether as an employee, a self-employed person or through a limited company - can depend on several factors.
Today, most interim managers choose to work through a limited company because of the tax advantages it gives and because, more often than not, their clients will demand it.
Andy Whally, commercial manager for Headwhay marketing consultancy and on the steering committe of the Institute of Interim Management, says, "Most of the larger suppliers of interim managers will insist that managers operate through a limited company. Certainly in the past couple of years, that has been the case.
Interims are required to have limited company status, a company registration document and VAT numbers. Increasingly, they are also having to provide professional indemnity insurance. They are also having to consider the implications of the new tax ruling, IR35, which came into force in April 2000.
The implications of the ruling are far-reaching, both for interims and for their clients. So great is the concern it has raised among the IT and contract services industry that the Professional Contractors Group has challenged IR35 in the High Court and a judicial review is underway, with a hearing due in mid-March.
IR35 investigates the status of "contract workers" to evaluate whether they are genuinely working under contract or whether in effect they should be considered to be employed. Because it is still so new, no one is clear about how stringently the Inland Revenue will apply the new rules.
Interim managers therefore need to pay close attention not only to the wording of their contracts but to how the work itself is structured. There is, of course, no such thing as a typical contract. An interim might be brought in to help the client company through a period of change such as a merger or acquisition or to replace an absent di