IT consultants are facing an increased threat of legal action from dissatisfied clients as the economic downturn worsens.
Hiscox, the specialist insurer, has warned that the economic downturn is likely to expose IT consultants to potentially costly legal claims for delivering a product or service that clients allege does not meet their expectations.
Listing a defective product or service from an IT supplier as being the top reason for a breach of contract claim, the insurer urges IT consultants not to over promise and focus on better scoping of IT projects from the outset, and tighter management of client expectations.
Cases of breach of contract - where a company claims its IT supplier has failed to deliver a product or service in line with an originally agreed contract - made up 36% of all the professional indemnity claims dealt with by Hiscox in the IT sector over a four year period.
Of the largest 100 IT claims handled and paid at Hiscox, the main causes of claims were:
68% claiming defective product or services - "it didn't do what they said it would do"
60% claiming inadequate project management
56% claiming inadequate initial scoping of the project
According to Hiscox, breach of contract claims could increase during an economic downturn where companies, who may be short of money, look to make cutbacks and reduce investment.
IT projects often come under cost-cutting scrutiny and some companies decide they can recoup some of their original investment, or get out of an existing contract, by claiming their IT contractor or company has not provided them with the IT system or service they were promised, said Hiscox.
Sam Franks, specialist IT risks underwriter at Hiscox, said: "The current economic downturn highlights the importance of IT suppliers, big or small, properly scoping a project from the outset to avoid costly legal action.
"It is critical they set down in the clearest terms what they intend to deliver with realistic costs and timelines, and then by careful management of the contract and client expectations, ensure any potential room for misunderstandings or disagreements is minimised.
Showing posts with label IT Consultants. Show all posts
Showing posts with label IT Consultants. Show all posts
Monday, March 2, 2009
Friday, September 5, 2008
IT contractor liable for £99,000 tax after losing IR35 case
The High Court has ruled against an IT consultant who was fighting a £99,000 tax demand for work he completed on behalf of motoring organisation the AA.
The Professional Contractors Group (PCG), which represents UK IT freelancers, has expressed its shock at the judgement, which it said could have major implications for other consultants.
The "Dragonfly" IR35 case involved PCG member Jon Bessell, the owner of Dragonfly Consultancy. He is now liable for £99,000 in tax. Speaking after the judgment was delivered, he said, "I am devastated by today's news. Not only does it affect my family and me, but all the other freelance professional consultants who are trying to earn an honest living. "I was never an employee of the AA and I simply cannot understand how the High Court has reached its decision. It is a travesty of justice."
The judgement found that Bessell was technically an employee of the AA when completing IT projects for the organisation, and that he was therefore liable for the £99,000 tax demand.
The Professional Contractors Group supported Bessell in bringing his appeal because of the potential wider implications of the case.
PCG managing director John Brazier said, "This is a potentially massive blow to freelancers throughout the country. This case threatens the long-established defences against IR35.
"We will be looking at the judgment in very close detail to work out its full implications."
The Professional Contractors Group will be publishing further guidance on the consequences of the judgment shortly, he said.
* - Article from Computer Weekly.
It is worrying that despite the Government always saying that they support small businesses and the freelancer market they permanently seem to be trying to clamp down on this section of our workforce. Back in 2002 one in ten of the working population was self-employed. I would imagine that this number has only increased in the last few years. Surely this number of people should be supported more. Yes everyone should pay tax (it's not like in the UK we aren't taxed enough) but what is the point of trying to better yourself, earn more, improve your and your family's living standards, add to the economy if all your hard earned money is going to be whittled away. The whole process should be simplified. It is all the Government rules and regulations that mean thousands are spent on Accountancy fees which still don't guarantee you safety from the long arm of the HMRC. Simplify it, make it easier to understand, promote entrepreneurial and innovative thinking, promote small businesses, promote freelancers, because without them this economy would struggle and companies will find skills that they want are now based abroad. It isn't really surprising that many people are looking abroad to try and find that better standard of living!!! I mean, this Government will take 40% of your hard earned money which you have paid tax on all your life and which you want to leave to your loved ones after you have died. Fair - I think not.
The Professional Contractors Group (PCG), which represents UK IT freelancers, has expressed its shock at the judgement, which it said could have major implications for other consultants.
The "Dragonfly" IR35 case involved PCG member Jon Bessell, the owner of Dragonfly Consultancy. He is now liable for £99,000 in tax. Speaking after the judgment was delivered, he said, "I am devastated by today's news. Not only does it affect my family and me, but all the other freelance professional consultants who are trying to earn an honest living. "I was never an employee of the AA and I simply cannot understand how the High Court has reached its decision. It is a travesty of justice."
The judgement found that Bessell was technically an employee of the AA when completing IT projects for the organisation, and that he was therefore liable for the £99,000 tax demand.
The Professional Contractors Group supported Bessell in bringing his appeal because of the potential wider implications of the case.
PCG managing director John Brazier said, "This is a potentially massive blow to freelancers throughout the country. This case threatens the long-established defences against IR35.
"We will be looking at the judgment in very close detail to work out its full implications."
The Professional Contractors Group will be publishing further guidance on the consequences of the judgment shortly, he said.
* - Article from Computer Weekly.
It is worrying that despite the Government always saying that they support small businesses and the freelancer market they permanently seem to be trying to clamp down on this section of our workforce. Back in 2002 one in ten of the working population was self-employed. I would imagine that this number has only increased in the last few years. Surely this number of people should be supported more. Yes everyone should pay tax (it's not like in the UK we aren't taxed enough) but what is the point of trying to better yourself, earn more, improve your and your family's living standards, add to the economy if all your hard earned money is going to be whittled away. The whole process should be simplified. It is all the Government rules and regulations that mean thousands are spent on Accountancy fees which still don't guarantee you safety from the long arm of the HMRC. Simplify it, make it easier to understand, promote entrepreneurial and innovative thinking, promote small businesses, promote freelancers, because without them this economy would struggle and companies will find skills that they want are now based abroad. It isn't really surprising that many people are looking abroad to try and find that better standard of living!!! I mean, this Government will take 40% of your hard earned money which you have paid tax on all your life and which you want to leave to your loved ones after you have died. Fair - I think not.
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