Contractors' Questions: Can I holiday as I want?

Contractor's Question : Can contractors take holidays whenever they want to? And does it make any difference if I set up as a limited company, or opt to work through an umbrella company? I ask because the holiday aspect will help determine the set-up route I take in January 2010.

Expert's Answer : Quite simply - it depends. The first step is to look at your contract or if, as in your case, you have not started out, then include holiday provisions in the contract. Of course many contractors do not include such provisions in their contracts. One option is to take holidays between contracts, however this is often impractical due to the lead times involved in finding a new contract. Alternatively, you could just take the holiday during an existing contract. Due to the nature of your relationship with the client, you obviously will not get paid for any days off that you may take. As a result you can take as many days as you like, though you need to consider both your bank balance and how the holiday will affect the client.

In quiet periods the client will probably be more than happy for you to go on holiday – particularly as they do not have to pay you for those days. However if there are any pressing deadlines, they are not likely to be impressed if you announce a three week sojourn to the Caribbean. You will of course need to be considerate of the client's requirements; after all it will affect your chances of a good reference and any further work with that client. As to whether the client has to grant you the holiday, this will depend upon the contents of the contract - if there are holiday allowances then they must, yet if not - then you have no rights to holidays (the client may however still allow them).

In order to stay outside IR35, your contract should include a 'right of substitution.' This clause simply allows you to substitute yourself with someone who is able to offer the same level of services. This will be at your cost but if you establish a relationship with other contractors it can provide an invaluable way of getting the time off that you need in contracts without holiday provisions. Again you need to make sure that your substitute is of good enough quality because otherwise 1) you may well be in breach of your contract and 2) you will damage your relationship with the client which could result in termination.

As for the difference between going for the limited company route or working under an umbrella company - again this will depend upon the contract itself. However from a basic position, if you are working under an umbrella company then you will be an employee of that company and are entitled to holiday (or holiday pay) in the same way as an employee of any other company. In comparison to going down the limited company route, it is therefore more straightforward in terms of arranging you holiday, but you need to consider all of the other factors for choosing between the two routes many of which will be more important than ease of arranging holidays.

Of course on the horizon we have the Agency Workers' Directive , which is also something that you should be aware of.

The expert was Ben Evans, partner at Lawdit Solicitors , a legal firm specialising in intellectual property, internet and technology law.