Increase in Notice Period

[NoviceContractor]

Hi all,

Looking for some advice - I've tried searching the forums, there are similar questions, but nothing which quite covers the below.

The background is that I signed a 12 month contract with a new client last year, both the parties have one month notice period. The client increased my rate and extended my contract couple of months back (mid contract rate rise) which I accepted after a bit of negotiation on rate. The notice period was again 1 month for both the parties. The client is willing to increase my contract again mid period for another 10 months but wants to increase the notice period to 2 months for both the parties.

The reason client is willing to extend the contract and increase the notice period is because client has key man dependency on me at the moment.

Client is a big financial global business and has paid notice period to any one who has been asked to leave before contract was over (you may be surprised but few contractors were asked to leave on performance grounds but were paid notice period). Looking at the track record of the client in terms of paying for notice period, I am thinking what do I have to lose if I agree for 2 months notice period? Can it be seen as negatively from IR35 perspective? If I have to leave the client then I do not see 2 months notice any problem for me as there are plenty of roles available so I can easily find the new roles.



Please share your knowledge and help me decide best option here.

Thanks.

[northernladuk]

I don't think 2 months is an issue. Particularly when there is the dependancy that you mention. Many contracts have different termination or exit periods depending on the criticality of the application or service. 3 months for no apparant reason would be bad but 2 months for a key resource is totally explainable.

The fact you are key dependancy also weighs heavily in your IR35 favour as it's clear they don't have anyone else that can do it.

If you are happy with it then go for it I would say, particularly if they have a habit of paying it should they not want you any more. Double bonus. Getting paid for not doing work isnt the best flag for IR35 but easily overshadowed by the other stuff.

Just do the standard diligence about getting your contract checked and IPSE+ membership or other tax cover.

Don't forget the 24 month rule though. Its not clear how many you've actually done but remember you can't claim the moment you sign a contract that takes you over 24 months. If they need you that badly get them to pay your expenses as well.

[WordIsBond]

Forget IR35 for a minute. From a business perspective, this is great. You are a supplier and one of your clients wants to extend their agreement and nail down the supply chain.

Re: IR35, it increases the likelihood that your contract would fail on the Mutuality of Obligation test. HMRC would have undoubtedly said it failed anyway, but a tribunal might have reached a different conclusion. So you just need to make sure you are clear on other factors. Substitution is going to be a hard one to argue even if it is in your contract because they'll argue that if the company is so dependent on you they wouldn't accept a substitute. But chances are if they are that dependent on you that you aren't under supervision/direction/control and IR35 falls on that point alone.

NLUK is right on the 24 month rule on travel expenses. It's not clear from your post, but if the extra ten months takes you past 24 months total then the rule kicks in. It's not when 24 months passes, but as soon as you agree to a contract that would take you past 24 months. Make sure you understand the rule fully, this thread is really good: https://forums.contractoruk.com/acco...-nutshell.html.

[LondonManc]

In addition to what the others have said - make sure that there's a difference between being seen as a key man dependency on the project and being seen as part and parcel of clientco. The former is great and is what's given you the increase in duration and notice. the latter is a disguised permie flag and bad for IR35. As long as it's only a project dependency and not a BAU process dependency, you'll be fine on that count. Don't expect the paid notice, watch out for the 24-month accounting rule, get your contract checked and fill yer boots!