By John Wakeford
From April 2020 medium and large sized private sector firms (over 50 employees) will bear the responsibility for determining the IR35 status of all their off-payroll workers.
While the vast majority of companies who employ interim executives have not yet announced how they intend to respond to the new regime, a number have already indicated they are taking a safety first approach.
In the heavily regulated financial services sector, Barclays, HSBC and Lloyds have all said they will in future only engage contractors on their payroll on a PAYE basis. Meanwhile Tesco Bank has also said that, at least for now, all limited company contractors will be declared inside IR35 after March 2020, until it agrees its long-term policy.
Should other corporates follow their lead in the weeks and months ahead and take a blanket approach to end all off-payroll contracts, the impact on the executive interim market will be seismic.
Interims would be forced to decide whether to accept the significant loss in income which being employed on PAYE terms, paying income tax and National Insurance and being taxed on expenses as an employee, would mean.
Obvious alternatives include seeking non-IR35 contracts, applying for permanent executive roles, working abroad, taking on NED roles or retiring.
The potential impact on businesses which rely on interim consultants could also be significant. By ending all off-payroll contracts they could lose access to the best talent, as highly experienced interim executives choose to only work with firms who will engage them outside of IR35 or instead leave the market altogether.
Another major concern is that with just a few months to go until the tax changes, so many companies and the interim consultants which serve them have still not decided the way forward.
A recently published report by specialist law firm Brookson Legal ‘Avoiding an IR35 talent drain’ includes a survey of more than 500 contractors which found:
In an earlier survey this year of more than 500 firms who hire contractors, also commissioned by Brookson Legal, nearly three in five directors said they would take a blanket approach to managing IR35 as they did not have the resources to assess individual contractors. This has certainly been borne out by the actions of some of the banks in recent weeks.
So what should interim consultants do?
Take action now. Interim consultants need to contact their client(s) to find out what they intend to do about IR35.
If your client(s) inform you they are ending all off-payroll contracts you need to establish if this will include existing commissions.
Get in touch with us to discuss your future career plans. We can identify other opportunities including interim contracts outside of IR35, permanent executive roles and moving into NED.
But don’t just wait for April…the clock is ticking.
John Wakeford is MD of HW Interim. Contact him at firstname.lastname@example.org or on +44 (0) 113 243 2004.