Interim payment: HMRC found wanting in landmark IR35 case
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Used wisely, interim staff can add significant value to councils’ service delivery. But a recent court case shows that Her Majesty’s Revenue and Customs (HMRC) needs to apply new tax rules fairly, says Stephen Fitzgerald.
It was with some pleasure that I picked up on a recent legal case.
Susan Winchester, a marketing and business development consultant, won an out-of-court settlement against HMRC, recruitment agency Kinect Recruitment and other parties for their failure to provide paid annual leave.
Interim staff have been increasingly at the front end of negative action, with the HMRC leading the charge through the changes to the IR35 rules.
Let’s be clear, interim managers in the public sector are as much part of the gig economy as delivery drivers.
In the public sector they now pay the same tax rates as permanent staff and are clobbered with employee’s national insurance (NI), sometimes employers NI, the apprenticeship levy, payroll costs and any other overhead clients or agents can think to burden them with.
Interim managers often deliver on assignments where there are particular difficulties and often step in where some corporate failure has occurred.
They are often essential to continued service delivery in tough circumstances and provide a resource that cannot be delivered through a mainstream employment mechanism.
The underlying hypothesis behind the 2017 changes to the IR35 rules for the public sector was that two workers undertaking similar roles in a public body should pay the same rate of tax.
However, under these circumstances, interim staff should have the benefits of employees.
It is simply astounding that HMRC did not apply that principle in this case and it is to the credit of Susan Winchester that this has been exposed.
Aside from leading an assault on a group of providers that provide an essential resource to the public sector, HMRC does not even have the basic competence to apply its own rules effectively, which is lamentable.
I am conscious that the costs of interim staff can provide a heavy burden on organisations and I always advise management that interim staff should be used as an exception rather than a long-term approach to human resourcing.
However, there are times, when used in short bursts, they can add significant value to service delivery and should be valued as such.
The idea that HMRC should lead on taxation changes then short change interims on their rights in the new circumstances is disappointing.
Perhaps this inability to have a coordinated and measured approach is a reason that there is some trepidation in the role out of the IR35 changes to the private sector.
If there is the same level of opaqueness and confusion there as in the public sector, it could lead to a significant level of dissatisfaction across the whole of the corporate world.
Susan Winchester should be applauded as a champion for the rights of a group of workers who take on the risk of working through a private sector model while making leading contributions to the public sector.
I wait to see when the government will implement a consistent approach in this space across all sectors, and demonstrate that it is being even handed in its policy towards interim staff and their clients.
Stephen Fitzgerald is director at Tamar Consulting
@SHJFitzgerald
