IR35 – 8 months on
We are over 8 months into the latest changes in IR35 legislation and demand is high. Reduced capacity, a need for subject matter experts, and high levels of senior turnover are leading to sustained demand for interims across all areas of local authorities.
Unfortunately we have not seen as drastic a shift in behaviours from clients in how they bring in interims. With political and media scrutiny at its highest on interim spend there needs to be a different approach taken in order that day rates remain low and interims are targeted on outcomes rather than daily input.
In a previous article I wrote about the dwindling pool of interim Finance Directors and what that meant for day rates but also availability at a time when demand is high. I think this could be applied to any statutory post in Local Government.
The result is that interims are costing more and this isn’t just a result of IR35, but market forces of supply and demand. In non-statutory posts there is more flexibility around the task you set an interim and this is where we feel that savings and more targeted briefs will lead to better value.
I think it is worth re stating the differences in IR35 legislation from March 2017 to April 2017. The definition of what sits in or out of IR35 hasn’t changed, but the responsibility for who determines the status and who is then responsible for ensuring the appropriate levels of tax has been deducted has changed.
· As of April 2017 it is the public bodies responsibility to determine if a role is inside or outside of IR35 and HMRC have created the online tool to help in this determination. Once an interim has been selected the tool can be filled in and it should then provide an accurate determination.
· It is then the fee payers (often the interim provider), responsibility to ensure the correct tax is deducted. Some public bodies still believe that they are then responsible for this but that is not the case unless the interim is directly engaged by them. It is whoever is closest to the interim or their PSC in the chain which has to ensure appropriate tax is deducted.
This means that the blanket approach taken by local authorities to limit their risk is not entirely necessary and is definitely not in the spirit of the legislation where ‘due care’ is required in determining status. Instead, local authorities are causing an increased cost for bringing in interims by doing so.
Where possible, we would like to see more authorities hire interims outside of their permanent structure in order to lead and deliver change. In doing so they can set a very clear brief, give the interim specific tasks and hold them to account for delivery whilst not burdening them with additional responsibilities that come with substantive posts. Interims will be faster to deliver thus reducing cost. Can be outside IR35, thus reducing cost. And the talent pool will increase, thus reducing cost.
If you want to explore further how this could work in practice then please contact the interim team at Penna.