Customer Insolvent - Advice Please

[S1M VP]

Hi all,
Done a quick search of previous threads but can't find the answer I am looking for, so here goes.

I first started with said company (X) seven years ago as a contract engineer (Ltd Co, contract for services).
Have worked with them throughout the last 7 years, sometimes providing several engineers and personnel for projects, but mainly just my services on various projects inc some interim mgt positions etc, but always on a "contract for services" arrangement.

They went into insolvency 2 weeks ago and I have just received the letters through from the IP requesting value of debt etc (£22,692!) ..... yeah I know I should never have allowed it to happen but personal friendships, loyalty and stupidity gained the better of common sense. This is made up of Feb 2009 to date fees, along with £12k from 2007/8 where the companies sales were lower and they asked me to roll-over some fees.

As far as I know, the debts outway the book value, and there are two 'charges' over assets etc so I am unlikely to get anything .... HOWEVER, I have just been looking on the net and found the Insolvency Act 1986 (light reading) which states in

PART III - RECEIVERSHIP
CHAPTER I - RECEIVERS AND MANAGERS (ENGLAND AND WALES)
SECTION 47 (3)

"In this subsection "employment" includes employment under a contract
for services"

Does this mean that Companies providing presonnel on a 'CONTRACT FOR SERVICES' are seen as employees by the IP??

My concern with this would be IR35, which has never applied as I have provided more than just myself on several occassions and have had other people stand in for me, when I was unable to attend/support. I have also performed work for several other businesses at the same time, but majority (90% T/O) has been with this one customer, hence IR35 does not apply.

HOWEVER, on the other foot, I also understand that 'Employees' are paid first, before preferential creditors and only the crumbs that are left over are shared between the unsecured creditors.

What category do I acyually fall under???
I suspect 'a creditor' and will get nothing, but thought I would ask the legal eagles or people in the know.

Obviously I want to try to get as much as possible - logic above is that if I am 'seen' by the IP as 'under the employment of X on a contract for services, I get £22,629 .... if I am seen as a creditor, I get nothing.

Any advice would be much appreciated !!!

PM me if you'd prefer.

[Eric Mc]

I don't think you can have your cake and eat it. You (presumably) have benefitted tax wise from being paid through your own limited company. For that to work, you had to show that there was no way you could be construed to be an employee. You (presumably) did all the necessary things to make sure "employee status" and IR35 were never applicable to the relationship.

Now that the "customer" can't pay you, you cannot really try to claim that you are any different to any normal unpaid supplier.

Having said that, there have been cases where non-employees (for tax purposes) have been deemed to be "employees" under other aspects of law - such as employee's rights on dismissal or employee's rights under the employer's duty of care for health and safety.

[S1M VP]

Hi Eric,

Thanks very much for the response, it is greatly appreciated !!

You are exactly right (as I tried to explain clearly above) .... but I was assured by the MD that I would get at the very least SOME of the money, but the banks reduced retention levels and game over came swiftly .... and as you can imagine, being out of work, in this climate, and losing £22k leaves me in a sticky situation - especially knowing 'normal creditors' won't see anything.

I know in a sense it is 'having cake and eating it', but I don't write the laws and policies of the land and it seems to me that one minute, contractors providing services CAN be seen as employees (when it suits 'them') and be seen as creditors the next minute (again when it suits 'them').

Thing that annoyed me was they managed to pay the March Salaries (inc the aforementioned MD, who's salary, inc his wifes salary is close to £18k per month !!!!) ... I got zilch as "I would have been seen as a preferential creditor"!! ..... although not happy, I'm not angry enough to push it as hard as I might. However misplaced it may be, loyalty & integrity mean something (at least to me anyway).

I am just exporing the possibilities as anyone in their right mind would do in my situation.

The IP did see me several times at the companies premises before being appointed, and I am just interested to know, as 'the law' (not my interpretation of it) states 'EMPLOYEES ALSO INCLUDES THOSE CONTRACTED FOR SERVICES' .... which is the category I would fall into.

Not after anything that isn't owed to me for my own hard work and sweat.