Experts in the contractor/interim market appear divided at the conclusion of the government’s consultation period on its ‘controlling persons’ proposals, which came to a close on 16th August.
For contractors who specialise in interim management, the proposals will affect them whether they work through Umbrella Companies or limited companies, as both will be remunerated ‘off-payroll’. PAYE Umbrella employees may have the advantage, as they can readily demonstrate that all tax and NICs due are automatically deducted and paid over on time.
A ‘controlling person’ is defined as anyone in a position to control the major activities of an organisation. Senior interims will fall into this category and are highly likely to earn more than the £220 daily rate stipulated by the government as the upper limit. At or above this level, for assignments lasting over six months, contractors will be required to permit their employing organisations to deduct NICs and tax at source. This is unless they can provide the obligatory assurances.
Speaking to Recruiter magazine, limited company expert Dave Chaplin of Contractor Calculator said: “The £220 a day rate is a low figure that will catch everybody. I cannot see any major changes to the government proposals. The government is going to do what it likes, just like with IR35. I am prepared to be disappointed.”
Raj Tulsiani of Green Park Interim and Executive Search, however, was more optimistic. The average daily rate for interims is £550, but their public sector assignments last 172 days on average, just below the six month limit. Mr Tulsiani believes that the new measures will help reduce contactor costs without harming interims, who are seen as a cost effective and efficient alternative to management consultants.
For Colin Howell of Crystal Umbrella, the change is long overdue: “The field is now level as a major area of concealed employment has been removed. Savvy interims have always enjoyed using PAYE Umbrella Companies, and this consultation will point many away from running their own limited companies (with all the admin burden, cost, risks of default and insurance) towards the simple and effective services of PAYE Umbrellas.”