What to do if a Client Cancels a Contract

(3 minutes to read)

Although as a contractor you won’t have the same employment rights as a permanent worker, there are ways of protecting yourself should a client cancel work. This can be achieved by ensuring you know your rights as a contractor and by creating your own terms and conditions contract for both you and the client to sign.

There are now more people than ever who are joining the contracting community – whether as umbrella company contractors, sole traders or limited company owners – and with the numerous benefits associated with being self-employed, it is no surprise to see why this method of working is growing in popularity.

Just a few of the benefits that come with working as a contractor includes:

  • Having more control of your career.
  • Having more flexibility – you can work as often or as little as you like (of course, the less you work, the less money you will make) and you will have more choice when it comes to who you want to work with.
  • Having the opportunity to potentially earn more than a permanent worker in the same role.
  • You are able to claim back expenses that are made wholly and exclusively for the running of your business, which will in turn reduce your tax bill at the end of each year.
  • If you’re a limited company contractor you will have more tax benefits, such as the Flat Rate scheme.

Of course, with most things in life, there are some negatives to contracting. For example, if you work from a home office you could find yourself being quite lonely during the day, you will need to ensure that you are motivated enough to get out there and find a constant supply of work and you will have more responsibility compared to your ‘permie’ counterparts.

Another issue that some self-employed workers could come across is if a client decides to cancel a contract.

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What steps can I take if a client cancels a contract?

There are some risks that come with contracting and one of these is the fact that you could have a job set in place and then the client decides to cancel either before or during the contract.

Unfortunately, being self-employed means that you won’t have the same employment rights as a permanent worker, however, you do have some rights. For example:

  • You are entitled to be paid for any work that you have carried out for your client.
  • You must work in a safe and healthy environment.
  • You should not be discriminated in the place you are working.

An example of typical contract breaches contractors may come across includes:

  • Late payment or not being paid at all.
  • Terminating a contract without enough notice.
  • Cancelling the contract before work has started.
  • Clients demanding services that are not included in the contract.

Many contractors will choose to create their own terms and conditions contract in order to protect themselves. This could include the expectations and the start and end date of a job before starting any work – it might even be worth including a notice period.

If a client cancels before signing the contract then there isn’t too much that you will be able to do from a legal perspective.

If they have signed the document, then they have in effect breached the contract and this will mean that you have every right to take legal action. But this can be very costly, so you need to consider whether it’s worth going down this route or not.

You could try talking to the person in charge or responsible for the breach before taking any action, however, if nothing can be resolved you could then look to hire a solicitor for just a few hours in order to discuss your grievance and see what can be done about the issue. That way you are not parting with as much money and can get an idea of where you stand and whether it is worth pursuing the case or not.

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Why Dolan Accountancy?

With over 25 years experience in contractor accountancy helping thousands of contractors, freelancers and the self employed, Dolan Accountancy has the specialist skills, reputation and credibility you can trust. Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £105 + VAT per month. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost. We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours.
  • Free use of Contractor Umbrella – With IR35 Legislation changes we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella.
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams.
  • Free Access to FreeAgent – The founder behind the multi award winning FreeAgent platform was one of Simon’s first clients, therefore it only seems fitting that we offer all of our clients access to FreeAgent, free of charge.
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year.
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status.
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative.
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.