Freelancers, will you Brexit-proof your commercial contracts and, if so, how?

It’s all very well of us to pose freelancers some questions about their commercial contracts in wake of Brexit, but just as important are the answers and what sole traders should be considering now, writes solicitor Karen Holden of A City Law Firm.

Freelancers, will you Brexit-proof your commercial contracts

As we all now know, the UK officially left the EU on January 31st 2020. But less well-known is what freelancers can and should be doing now to ‘Brexit-proof’ their commercial contracts.

At the time of writing, even post-January 31st 2020, the exact manner of the UK’s exit from the EU is still unknown.

This is because until at least December 31st 2020, the UK remains in a transition period. Effectively nothing much from a legal/ laws perspective has changed and while terms with the EU itself are being negotiated, we simply do not know how ‘freelance-friendly’ the new legal landscape will be at the end of the transition period.

Businesses of all size should be alert and stay alert to any upcoming changes which may affect them. They should be constantly reviewing proposed changes and how such changes may impact on their business. By now everyone should be thinking about whether there may be any possible effects and implications commercially of Brexit on their business and, in turn, on their commercial contracts. And even more so if any of the following apply:

  1. The contract has a cross UK-EU border element to it. For example, supply of goods or services;
  2. The contract term will continue after the UK’s scheduled transition out of the EU (December 31st 2020), and
  3. You, the business, has a commercial contract with a business in the EU which will be affected by Brexit.

Brexit clauses – are these a good idea?

Some people are trying to utilise what is being termed a ‘Brexit clause’ within commercial contacts. These typically try to say that the parties will attempt to renegotiate relevant commercial aspects of the contract in the event of additional obligations/ burdens being imposed on a party after the transition periods. These are being designed to try and ensure that business will continue as normal between the parties.

However, there are risks with these clauses given their uncertainty at a time when we just don’t know what lies ahead! You may not want to give the contracting party the opportunity to renegotiate your key terms as these may not end up being favourable for you, or you might wish to rely on termination in the event of significant changes as otherwise the relationship is not sustainable.

Freelancers may be better off ensuring their contracts can be properly terminated for convenience instead and giving proper consideration to notice periods. The British Courts have long enforced contracts which are just bad commercial bargains, however unfair these may be.

What about IP?

With all creations you and your business own, you must ensure that these are properly protected in your contracts irrespective of Brexit. After all, Intellectual Property is arguably a business’ biggest asset!

With trademarks and branding in particular, it may be beneficial to explore sooner rather than later whether you want to register your brand for an EU trademark before December 31st 2020.

Self-employed should scrutinise the small print, sooner rather than later and stay up to date with changes

Although legalese and contractual jargon can be baffling, the self-employed and sole trader freelancers are generally the first to feel the impact of economic changes; especially where those changes are adverse. As an unincorporated freelancer, you should stay very alert as to when or if your post-Brexit transition period contracts need to be amended and, most crucially, that you fully understand its consequences.

More so, the new IR35 rules coming in this year should be evaluated as these are more likely to have an immediate impact on freelance consultancies than anything else.

We have started to advise clients to review their terms and working arrangements around this, because they could be scrutinised by HMRC and challenged. Audit the terms and how you work to see if these can be amended to overcome the rules and if not, take tax and legal advice immediately to restructure how you continue to operate.

What can I do about Brexit's impact on my business now?

Unfortunately, until a deal with the EU is negotiated and we know just how Brexit will affect laws, trade, customs and the like, there is little legally that can be done by a business.

However, staying up-to-date from trusted sources, such as your legal team and other professional advisers is advantageous. As the old adage says, ‘Forewarned is Forearmed.'