Tag Archive | "notice period"

Let’s leave notice periods for the permies. We don’t need them!


Last week I got into one of those elliptical conversations you sometimes have on the internet. It started off with one of those all-to-frequent questions, “My new contract hasn’t got a notice period! What am I going to do?” Silly question: “Earn a lot of money while you finish the gig” was my response.

This, apparently, was the wrong answer. Heigh ho…

And this is where it started to get confusing. The main thrust was that if I have a notice period and the contract is terminated early, I’ll get paid for not having to do any work. Which is a good thing, yes?

No, I said, it isn’t.

Then someone else chimed in with a tale of being terminated early and having to threaten legal action to get his notice period paid. Unsuccessfully, it transpired, but let’s not spoil the argument with reality.

OK, so let’s explore this a little more deeply.

One of the three major planks of a solid IR35 defence is to have the minimum level of Mutuality of Obligation between you and the client, the other two being a lack of Direction and Control and a Right of Substitution. Which we all know already of course.

But a minimum of mutuality, put simply, means that they don’t have to offer you work, you don’t have to take it and they don’t have to pay you if there’s no work to do. Like, for example, when the job is done and they don’t need you any more. At which point they would rather like you to go away and stop costing them money because you are a contractor and that’s why they hired you/

So if you insist on being paid for working when there is no work to do, aren’t you now demonstrating something rather more than the irreducible minimum set by case law? This rather blows a hole in your IR35 defence, unless you can demonstrate an absolute lack of Direction and Control and even then your case is seriously weakened.

There is, needless to say, a second thread to this debate. What if you want to leave the contract early? Something I’ve never done myself, but there can be good reasons for it (and, let it be said, some very pathetically amateurish ones) If you have a notice period, then you can exit gracefully stage left simply by giving the stated notice. You probably won’t be that popular, but it’s not wrong to exercise your contractual rights. However, if you haven’t got a notice period, then you are stuck there for life, or something, with no hope of escape. At which point I might ask why the hell you signed the contract in the first place, if it’s that important, but I digress.

You can always leave a contract. The process is called “negotiation” or, if you’ve really been paying attention, “Substitution”. Either will work, it will be a very strange manager who wants to force someone to stay who clearly doesn’t want to be there.

So argument settled. You don’t need or want a notice period. Ermm, no, apparently. “I got terminated early and I have a four week notice period so I want paying for it” was the refrain. Isn’t this where we came in…?

OK, so even if we ignore the Mutuality argument, you’re still missing a couple of key details. Firstly, your contract will almost certainly have something along the lines of payment being conditional on a signed timesheet or some other authorised evidence of work done. If you’re not working, you won’t have one, so no payment is owed.

Secondly the contract will also contain a clause to the effect that the client or the agency can terminate the contract with no notice at their absolute discretion. And that rather buggers the whole debate, doesn’t it?

The net result of all this is that while it’s a nice to have, and it’s an even nicer to have honoured, notice periods in freelance contracts are not only pointless, they may well be expensive. So let’s leave them for the permies. We don’t need them.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: pointless first iPad/iPhone test app by mac morrison

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IR35, EBTs and the tenacity of HMRC


Just like buses, two cases of interest to freelances concluded this week. After seven years, a contractor named Mark Fitzpatrick has been found to be outside IR35 by a Tier 1 Tribunal. And another imaginative scheme to avoid paying taxes has been found to be not exactly effective.

The IR35 appeal has been rumbling on since 2009, when an appeal was lodged against earlier claims relating to contracts dating from 2001, 2003 and 2006. They involved work Mr Fitzpatrick was doing for Airbus since setting up his limited company in 1996 (same year as me, coincidentally). The details of the case are the usual deeply argued and complex analysis of the facts, but the end result was mainly that because Mr Fitzpatrick’s contractual arrangements failed to demonstrate mutuality he was not in the scope of IR35.

The reasons given for this conclusion are, to the informed reader, blindingly obvious. Mr Fitzpatrick (and others) had been sent home without pay when their IT systems failed and they could not do any meaningful work. Also Airbus could cancel Mr Fitzpatrick’s company’s contract at any time without notice.

The attentive reader may recall me raising this issue of no notice in the past. I’ve long argued that while some week’s notice on both sides may be commercially advantageous, any notice period implies you may be paid for work when there is no work to be done – else why has your contract been terminated?

Still it this is HMRC we are talking about: taking three years to decide a clearly un-winnable case is winnable and another three to discover what any half-informed contractor could have explained in a few minutes is a mere bagatelle.

The other worrying part of this case perhaps warrants wider examination. On of the witness’s evidence was dismissed by the Judge, for several reasons, one of which was that it appeared to have been prepared for him by HMRC. So not exactly impartial evidence then….

The other case concerned a company called Aberdeen Asset Management, who had contrived a scheme to save a few million pounds of tax and NICs for its directors. The judge in that case carefully and completely destroyed their case in a 10-point judgement.

Looking at the detail of the case it was clear that it was perhaps doomed to failure. It was not an EBT – although an EBT was part of the daisy chain of intermediate companies and itself paid out to some 400 other people (who presumably are now looking over their shoulders) – and was benefiting its own employees rather than any third parties, so shouts of glee from other scheme providers that this was nothing to do with the ongoing arguments about contractors using EBTs and set no precedents were to be expected.

Except for two small details. Firstly, that HMRC are clearly aiming to shut down any and all schemes that they perceive to be artificially created in order solely to avoid taxation. Secondly, as the Aberdeen Asset case proves, HMRC are not bothered how long it takes to get its tax back, but get its tax back it certainly will. And if you have to sell the house and the children to pay it, well tough but them’s the rules.

All of which leads to an interesting dichotomy. On one hand we have HMRC pursuing a case that was clearly un-winnable for 10 years, costing several tens of thousands and recovering absolutely nothing beyond egg on their collective face. On the other we have HMRC spending ten years to pursue a case against a scheme that was clearly never going to fly and eventually regaining a few millions in unpaid taxes.

Such tenacity is to be admired, in a way. But such a shame that HMRC lacks the wit to work out which case to spend ten years on in the first place.

About the author: Alan Watts

Alan has worked in IT for most of the last 35 years, and first went freelance in 1996. He has been a PCG member from its start and has been spreading the message that freelancing is a professional career choice for many years. Alan also runs Malvolio’s Blog, a personal but highly informative take on the life of the modern freelance.

Alan Watts, Principal Consultant, LPW Computer Services

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited<

Image: Rosie by Chris Barber

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