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INTERIM UPDATE
Institute of Interim Management in association with
Association of Chartered Certified Accountants
London – 17 February 2009
© IIM 2009 All rights reserved
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Tony Evans Director
Tom Brass Chairman
Institute of Interim Management
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Agenda
• Current Market Conditions What is going on? Latest Market Research: Interim Practitioner
feedback • Regulatory Round-Up:
Personal Tax Issues: HMRC’s latest stance Employment Legislation: Giving you rights you
may not want Money Laundering Regulations
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Current Market Conditions
• What it was
• What it is
• What it is likely to be
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Interim Market Size: end 2007 • MORI research suggests a UK market of c.£1.0 bn
(cost to client),
• Split 2:1 between the private and public sectors
• Sourced from: • primarily independent interims: 75 - 80% • Providers: 20 - 25%
• IMA members estimated to have c.10% mkt. share in toto
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Interim Market Size: end 2007
Sector % of assignments
Local Government
40
Health 17 Education 11 Non Dept’l Gov’t Bodies
8
Central Gov’t 7 NFP 6 Charity 5
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Utilities
Banking and Finance
Business services
Chemical/ Pharmaceutical/ Biotech
IT/Telecom
Manufacturing
Retail
Transport
Media
15%
14%
12%
10%
9%
5%
5%
4%
13%
Assignments by Sector – private industry
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Interim Market Size: 2007
• “Sales” by Function: Top 5+ HR: 17% Finance: 15% IT Prog. Mgt: 13% Service Professionals: 9% Project Mgt: 7.5% (General Mgt: 6.5% + CEO/Chr: 3%)
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Interim Market 2009
• First market slowdown since 2000 • 10+% fall in assignments • Seasoned Interims doing better
than younger people • Fees increase by ave. 1.5% since
mid ’08 Market data obtained Dec.’08/Jan’09
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Market Issues: 2009
• Credit crunch means: Denial by PE & Hedge Funds Banking ‘overload’ Debt junk Covenant breach or imminent Working capital tied up &/or creditor/
debtor day stress Impairment charges
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Market Issues: Demise Curve
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Market: Future Concerns • Turnaround OK before insolvency becomes
inevitable: dire issue for 2009/10 • Is the turnaround do-able? Issue • Even more need for cash monitoring & efficient
operational running – in parallel • Recession lasts longer than you think • Courage of lenders to support the turnaround? • Stabilising cash flow with sales volume fall • Additional capital raising very hard • Private Equity fund re-funding issues?
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Market Issues: 2010 & Beyond
• Government Debt • Liquidity at all levels • Interim ‘Look – alike’ numbers go up • General Election • Value of sterling vs $, € • Run away inflation or depression? • Serious pension problems • Arrogance, humility, confidence & trust
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Regulatory Round-Up
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Regulatory Round-Up
• Personal Tax Issues: HMRC’s latest stance
• Employment Legislation: Giving you rights you may not want
• Money Laundering Regulations 2007
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Income Shifting • July 2007 – HMRC loses s660 (Arctic Systems)
case in House of Lords • Dec 2007 – HM Treasury consultation on draft
legislation to rectify tax law from April 2008 • Mar 2008
Vociferous responses to consultation 7,507 sign petition on No 10 website 178 MPs (27%) sign early day motion Legislation deferred to commence April 2009
• Nov 2008 – PBR defers legislation because of economic situation, issue to be ‘kept under review’
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Why Employment Status Matters
• Rationale for using Interims depends on Interims not being employees of client
Resource can be turned off and on without claims for wrongful dismissal
Interim responsible for own benefits Performance – improves measures linked
to headcount No need for client to apply PAYE/NI
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Self-employed
• Demibourne case: HMRC must assess client even where someone
else in contract chain has already paid tax no credit given for payments by other persons
• Superseded by Income Tax (PAYE)(Amendment) Regs 2008. Discretion normal unless the employer
deliberately colludes to avoid payment of PAYE and NI.
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IR 35
• Depends on employment status
• ‘Badges’ of self-employment: Undertake projects not roles Carry financial risk Mutuality of obligation? Determine what needs to be done, when and how Supervision and control? Right of substitution/sub-contractors ‘Own tools’
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Recent Cases (1)
• Dacas v Brook Street Can look across a three-sided
arrangement • Cable & Wireless v Muscat
Arrangement artificial • James v Greenwich Council
Control, but no mutuality of obligation
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Recent Cases (2)
• Dragonfly Consultancy Limited v HMRC Substitution Control Intention of parties Worker status
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Lessons • Get the right terms in the contract
Record statements of choice Use the right language Address mutuality of obligation Address right of substitution Address right to work for other clients in parallel New contracts, not rollover ‘Upper’ contracts
• Reality = words Ensure client operates the contract terms in practice Avoid integration – Interims treated differently:
supervision, presence/absence, holiday/sickness, discipline, canteen, staff events etc
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Agency Workers Directive • Effective 5 Dec 2008, must be adopted into
UK law by 5 Dec 2011 • ‘Social partner’ input (CBI and TUC) • Agency workers get at least same basic
working conditions + pay, after 12 weeks on assignment
• UK’s definitions of ‘worker’, ‘agency worker’, ‘conditions’, and ‘pay’ yet to be determined
• BERR consultation in 2009 ([email protected])
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Money Laundering Regs
• Effective 15 December 2007 • All transitional periods for registration
with a regulator have now expired. So: It is a criminal offence to start or carry on
regulated activities without a regulator already in place
Regulator = ACCA or HMRC Practising certificate required?
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Regulated Activities • Providing accountancy services and/or tax advice • Acting as a freelance director if:
acting on nominee basis
client operates in a high risk jurisdiction or a high risk sector and is not
• already supervised under the MLR or • a public authority anywhere in the EU or • a firm authorised by an EU public authority to act on
their behalf where the only customers are also public authorities
• Arranging for another person to act as a director
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Regulatory Requirements (1) • Maintain registration current • Establish & communicate your risk-based
policies & procedures
• Customer due diligence Normally risk-based Be reasonably satisfied that clients are who they
say they are = identity and verification Know who they are acting on behalf of – eg
beneficial owners Simplified due diligence Enhanced due diligence
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Regulatory Requirements (2)
• Ongoing monitoring of client’s transactions
• Document / record Policies and procedures Customer due diligence
Monitoring
• Report suspicions to SOCA Making reports Obtaining consent
• Beware “tipping off”
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Further Sources of MLR Help • ACCA – Search for money laundering on
www.accaglobal.com/ • CCAB – MLR Guidance for the Accountancy Sector
www.ccab.org.uk/. • HMRC – www.hmrc.gov.uk/mlr/
MLR 9 – Guide to registration (esp Chapters 3, 6, 7 & 8. See 6.1.14 & 6.1.15 for meanings of ‘high risk jurisdiction’ and ‘high risk sector’)
MLR 8 – Guide to implementing the requirements of the MLR
• SOCA – Report suspicions via www.soca.gov.uk/ CCAB and HMRC documents have force of law
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A Final Thought!
“It's only when the tide goes out that you learn who's been
swimming naked”
Warren Buffett
