Experts divided over ‘controlling persons’ legislation

Following the end of the government’s consultation period on ‘controlling persons’ legislation on 16 August, those working in the interim/contractor market are divided on the proposals.
Tue, 28 Aug 2012

Following the end of the government’s consultation period on ‘controlling persons’ legislation on 16 August, those working in the interim/contractor market are divided on the proposals.

The government wishes to ensure that “where an organisation engages a controlling person, the engaging organisation will be required to deduct the income tax and NICs (National Insurance Contributions) at source as they would for their employees”.  

HMRC defines ‘controlling person’ as “a person in a position to control the major activities of an organisation”.

It has proposed that within the public sector contracts of under six months will not be included and that where an interim is off-payroll for more than six months on a day rate of more than £220, government departments have the right to “seek assurance” that an individual is meeting their tax/NIC contributions.

“The £220 a day rate is a low figure that will catch everybody,” Dave Chaplin, founder of ContractorCalculator, tells Recruiter.

“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,” he says.

However, Raj Tulsiani, chief executive at Green Park Interim & Executive Search, tells Recruiter that given the average public sector assignment is for 172 days and the average day rate is £550, the proposals are “a perfectly sensible way of reducing cost in the contractor market but that the interim market is already highly regulated with legislation ensuring that each limited service company pays its due taxes ”

He says the proposals will encourage the public sector to use the interim market more carefully. “It will also allow interim managers to be used as a cost-effective alternative to management consultants to design and implement public sector transformation.”

The comments come after a story in the Health Service Journal indicated that the NHS was already implementing the government’s proposals. 

The story indicated that only interims on contracts longer than six months and paid more than £220 a day should be paid off-payroll and only after they have provided assurance to the NHS about their income tax and National Insurance contribution arrangements.

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