How Can a Contract Be Discharged by Frustration Ir35

If you`re a freelance contractor, you might be aware of the term IR35. It`s a tax legislation in the UK that closes a loophole used by many contractors to reduce their tax bills. Basically, it applies to those who provide their services through an intermediary, like a limited company, but would be considered an employee if they were hired directly by the client.

Now, what happens if you`ve signed a contract that falls under IR35, but circumstances change and you can no longer fulfill the obligations stated in the agreement? Can the contract be discharged by frustration?

Before we dive into that, let`s define what frustration means in contract law. Frustration occurs when an unforeseen event makes it impossible or radically different to carry out the contract, and neither party is at fault. In other words, something unforeseeable happens that makes it impossible to fulfill the terms of the contract, and it`s not anyone`s fault.

So how does IR35 play into this? Well, if you`re a contractor providing your services through a limited company, and you`re caught by IR35, you`ll be subject to the same tax burdens as an employee. This can significantly reduce your income, and may cause financial strain on your business – which could ultimately lead to the frustration of the contract.

If you find yourself in this situation, there are a few considerations you should keep in mind. Firstly, you should review your contract to check if there`s a specific clause that covers frustration. If there is, it may give you an idea of what you need to do to trigger the clause, and what rights and obligations you and the other party have in case of frustration.

In the absence of a frustration clause, you may still have a case for frustration if the event that led to the frustration was truly unforeseeable and beyond your control. For example, if you`ve been hit with a sudden illness or injury that makes it impossible to continue working on the project, you may be able to argue that the contract has been frustrated.

However, frustration is not an easy defense to make, and it`s up to the courts to determine whether a contract has indeed been frustrated. If you wish to pursue this option, you should seek legal advice before taking any action.

In summary, if you`ve signed a contract that falls under IR35 and are facing circumstances that make it impossible to fulfill the terms of the agreement, you may have a case for frustration. However, it`s essential to review your contract and seek legal advice before taking any steps to terminate the contract.