Other legislation affecting interims

There are many key items of legislation that an interim operating through a limited company must consider. It is not necessary to learn the fine print of these regulations, but it is important to be aware of the basics.

Competex Ltd, a specialist accountancy practice for interims and consultants, has processes in place to handle the relevant legislation efficiently, and offers company secretarial services, meaning that they will be able to deal with the relevant paperwork and correspondence from HMRC and Companies House for you.

Agency Workers Regulations (AWR)

The Agency Workers Regulations exist to ensure fair working terms and conditions for temporary workers, stipulating that temporary workers must be given many of the same rights as permanent employees. The regulations apply to interim managers and some consultants unless they can demonstrate that they are working through their own limited company, with their contract clearly stating that the client is hiring their company’s services and not their services as an individual.

All temporary workers are entitled to certain rights under the regulations. These are divided into ‘Day 1 rights’ (such as access to facilities such as a canteen and parking) and ‘Week 12 rights’ (such as pay between assignments, entitlement to certain bonuses, and holiday entitlements including annual leave, rest breaks and payment in lieu of notice).

Clients who hire interim managers and consultants do not wish to enter into such onerous agreements, as these involve extra costs and legal burdens. Therefore, interims and consultants must assume responsibility themselves for such business rights, which is something that should be stipulated in the contract.

Money Laundering Regulations (MLR) 2007

Consultants and interim managers who are acting for clients in high risk sectors at director level are required to register with HMRC or with their own professional body for supervision before carrying out any relevant business activities.

In addition, anyone who is providing accountancy services at any level in the private sector, regardless of whether qualified or not, will have to register under the heading of Accountancy Service Provider (ASP). However, the public sector is excluded from the regulations. The HMRC regulations and guidance can be viewed here.

Professional indemnity (PI) insurance

Working as an interim or consultant produces potential insurance problems that would not occur if you worked as a company employee.

Professional indemnity insurance covers you against the cost of litigation in case of your negligence when working on clients’ affairs. It protects your business against claims for loss or damage made by a client or third party if you make mistakes or are found to have been negligent in some or all of the services you provided. PI insurance will also cover legal costs.
In many professions, individuals are required to have PI insurance cover as a regulatory requirement or as part of their professional authorisation. This includes solicitors, accountants, architects, mortgage intermediaries, insurance brokers and financial advisers. Others such as consultants, advertising and PR professionals, and designers choose to have this type of insurance. You should certainly have PI cover for the work you do as a consultant or interim manager. Most interim providers will insist that you hold this cover.

The amount of cover you will need will depend on the type of work you are doing, but cover of £250,000 to £500,000 is probably sufficient for most assignments. Ultimately it depends on how much damage you could do to your client if things went wrong.

The premium for cover at this level is currently in the region of £250 to £400 per annum. If you are already a member of a professional association, you should consider approaching one of the brokers that deal with your association, as they will be specialists in your field. Otherwise you might consider an insurance broker that specialises in the interim management and consultancy market.

To avoid paying unnecessary premiums, it is recommended that you do not take out insurance until immediately prior to starting your first assignment.

Employment Agency Regulations (opt in/out)

These regulations affect the relationship you have with your provider, and the relationship that your provider has with your client.

The regulations seek to protect temporary staff, whilst changing the way that agencies can charge their client, should the client retain the temporary worker in permanent employment.
With effect from 6 July 2004, temporary staff (including interim managers working through their own service company) are deemed to be ‘agency’ workers. However, it is possible for those interim managers to opt out of the regulations (unless providing services to young, aged, vulnerable or sick people).

By default, you are opted into the regulations, meaning that your provider must pay your fees regardless of whether your provider has been paid by your client. You therefore have a degree of protection by being opted into these regulations.

However, if you are opted in, your provider or client is required to complete extensive background checks on you prior to hiring you for any assignments, and for this reason they may not give you preferential treatment for assignments.

For interim managers working through a limited company, there is an option to formally opt out of the regulations, and there are advantages in taking this course of action. By opting out you are showing that you are not controlled by your client and this sends a positive message to HMRC about your employment status. This could affect your standing with regard to IR35 and the Agency Workers Regulations.

It is generally recommended that you opt out of the regulations, and this is done by signing a declaration before being introduced to the client. In most cases providers and clients will prefer that you do this, and your provider will help you with the documentation.

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