The business of change remains the same after IR35
13th February 2020
Trying to describe IR35 to an alien, or in this case my Paris colleague Stephane Mellinger, I was met with the classic Gallic shrug. “…plus ça change, Nick, plus c’est la même chose!”. He’s right – nothing’s different in the business of change and transition. Companies need to manage planned and unplanned situations – and they won’t always have the experience in-house to deal with it. This led to the growth of the interim executive industry in the early 1990’s in the UK. These interim executives are not, and never will be, employed and demand for them is not going away any time soon.
Meanwhile, in a bar last night in London, I’m sat with the human resources director of a financial services firm, which has been engaging people off-payroll for years. “Nick..”, he said, “we’ve had all this risk on our books for years – the government has just made us liable for it. We’ve just got used to the flexible resource, it serves our business well.”
Both are right. Nothing has changed since IR35 was launched by chancellor Gordon Brown in 1999. It’s just not been tested in the real world. The application of IR35 in the public sector appears to be a mess. Some public sector organisations even have large provisions on their balance sheets because there’s so much open to interpretation as to what’s inside or outside IR35. They’re worrying about tax risk instead of using our money to provide vital public services.
What has changed is that the government has put the liability for checking employment status onto the hiring organisation. Typically risk-averse when it comes to tax, of course businesses will think twice about hiring anyone off-payroll at the moment. And just when the economy needs flexible resource to manage change and uncertainty more than ever.
Without being clearer about employment status definitions, the government has created massive uncertainty in the economy. In IR35 seminars across the country, there is confusion about what IR35 is meant to achieve. Tax should be clear – you either owe it or you don’t. This is a tax open to interpretation. Because of this lack of clarity, companies may need to hold provisions on their balance sheets in case of future tax bills, just because they interprete IR35 in a different way to HMRC. Financially prudent, entirely ridiculous, and hindering change.
IR35 leaves the field clear for genuine change agents
In the 1990’s, interim pioneers like my excellent mentor, Martin Wood, saw interim executives solving two business problems – how to manage change and how to cope with transition. Nothing has changed since then. Organisations have got used to this experienced and immediate resource. Interim executives are a vital and instant leadership solution for the UK economy, keeping it agile and responsive to market changes.
As long as interim executives agree a clear assignment brief with the engaging organisation, deliver it and exit within a period of up to 18 months, this work should be untouched by the fog of IR35. A brief must comprise a clear schedule of work to be delivered under the control of the interim executive. If employees exist within the engaging organisation who are available and suitable to deliver the assignment, then no interim executive should be needed.
Transition is also a vital solution offered by interim executives. An organisation may find itself coping with changing markets or it may be going through the gears of growth. Interim executives provide vital extra experience to get organisations through these situations.
Equally, if a permanent executive suddenly leaves, or a different executive is needed to get an organisation through a period of transition for the next 6 months or more – an interim executive is the best solution. These ‘transition executives’ give businesses essential breathing space to plan for the future.
The proposition offered by interim executives is clear – it always has been. If it’s not change or transition, it’s not interim.