Three legal issues freelancers can face and how to manage them
- 03 Mar 2022
- Markel Direct
When choosing a career as a freelancer, the benefits are plentiful including having the freedom to choose how much or how little work you take on, where you work, who you work with, what you work on and overall having the freedom to control your own career.
But when choosing to work solo, you take on all the responsibilities that come with running a business which leaves you open to a range of legal risks.
If something goes wrong or you accidently make a mistake, you could be left facing a legal battle and financial struggles.
In this article, Markel Direct explain three of the most common legal issues freelancers face and what you can do to best manage these disputes and give your business the best chance of thriving.
Not getting paid on time
Late payments are one of the biggest challenges freelancers and small businesses face. If a client doesn’t pay you on time, it can cause financial difficulty and put a strain on your relationship with your client.
To help manage late payments, it’s vitally important to make sure that you have a written and signed contract for services for every client you work with. With a signed contract that outlines payment terms and conditions, if a client hasn’t paid you on time, they are in breach of their contract which means you can take legal action against them.
Without a contract, if a client does not pay on time, there is little you can do.
If weeks pass by and you’re still waiting to be paid, it could be worth seeking legal advice from a solicitor. This is where IPSE’s legal helpline can be helpful. If a client is in breach of their contract and you want to take legal action, they can provide guidance on your options.
Read Markel Direct’s guide here on how freelancers can get paid on time.
When you’re self-employed, completing your self-assessment tax return is an important responsibility.
Ensuring you've completed your tax return correctly can be time consuming but if you rush and make a mistake in your tax return, it could result in a tax investigation from HMRC.
To avoid this happening, try to be extra vigilant when completing your tax return. When you’re busy with work, it’s tempting to leave it to last minute but try to give yourself plenty of time to get it completed. This will prevent mistakes from being made.
As well as the tax return, there’s also tax status factors to consider. If you’re working outside IR35 as an independent business but HMRC suspect that you are working inside IR35, this again could lead to you dealing with a tax investigation.
In the worst-case scenario, if you are subjected to a tax investigation, IPSE membership can protect you financially by covering your legal costs and expenses.
Accidentally making a mistake in your work
For many freelancers, your experience and your advice are what you build your business on. Clients are often making big changes based on your recommendations.
If one day you accidentally make a mistake and give advice that doesn’t deliver good outcomes, this could cause your client a financial loss and leave them dissatisfied.
No matter how meticulous and professional you are, mistakes can easily happen – it could be something as simple as a miscalculation that causes a financial loss for your client.
While some clients may value your relationship and overlook this error, there’s always the risk of a client taking legal action if they’re unhappy with your service. If they do take legal action, it’s likely they’ll try to make a professional indemnity claim against you.
When it comes to avoiding this type of issue, the first piece of advice would be to ensure you’re thorough with all the work you produce, but even that is not always enough to avoid mistakes completely. After all, you are only human. Ultimately, the best way to manage this situation is to protect your business with professional indemnity insurance.
This way, if ever a client does make a claim against you, you’ll be protected financially. You can learn more about professional indemnity insurance here.
As well as having this insurance, it’s a good idea to add a limitation of liability clause to all client contracts. This will limit your business’s risk of financial loss through damages if you are found to be at fault.
You can read the full guide here.
IPSE members can enjoy a 10% discount* on contractor insurance from Markel Direct, including professional indemnity, public liability, employers’ liability and more.
* IPSE 10% member discount terms and conditions
The discount will be applied to the net policy premium before insurance premium tax is applied. All quotations provided will be subject to meeting underwriting and claims criteria acceptance. All cover will be subject to full policy terms and conditions which are available upon request.
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