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The Government's new proposals to introduce 'controlling persons' legislation to ensure that influential 'off payroll' workers are taxed at source by the companies they work for, could have a devastating effect on the interim management sector, according to two leading industry organisations.

Last Month, the Treasury announced a consultation into a proposal to clampdown on the use of personal limited companies by individuals who provide consultancy services to organisations.

In what is seen by many as an unnecessary and ill thought-out proposal, the Association of Professional Staffing Companies (APSCo), and the Institute of Interim Management (IIM) have written to the Chief Secretary of the Treasury, Danny Alexander to "vociferously oppose these proposals" which they claim will act as a blunt instrument against an important business sector.

The industry groups are concerned that the Government believes that the use of personal service companies to 'disguise employment' is a rapidly growing phenomenon, simply because when IR35 was introduced in 2000, senior or 'controlling' persons were less likely to work via their own limited companies.

The increase, the groups say, is due to the booming interim management market over the past few years rather than any underhand attempt to disguise employment. According to a recent poll, the business generated by the interim management sector has grown by over 90% since 2007.

Ann Swain, Chief Executive of APSCo, who has actively taken part in IR35 Forum discussions over the past year, suggests that rather than create new, unfair rules, the Government should apply the current IR35 rules correctly, and that "consequently APSCo believes that there is no requirement for a change in the law."

Ad van der Rest, co Chairman of the IIM, says that the new proposals would impact the interim sector massively, and would freeze out a group of executives which are badly needed in the current economic climate.

van der Rest said that not only is it wrong for individuals to be penalised due to their seniority, but the Government's implication that "all senior interims are in some way trying to evade their legal obligations by hiding behind personal service companies is perverse".