Contractors Financial problems – when contractors are in trouble

Contractors Financial Problems
Contractors Financial Problems

Contractors Financial Problems


You shouldn’t worry too much when contractors financial problems strike.

You are never in as much financial trouble as you think they are. Moreover, you just have to know what to do.

My Predicament

A reader sent us this:-

I was in a dire situation, but with the dreaded VAT MAN!

I was out of work due to ill health and battling with my PHI company trying to tell them I could not work.

Local Accountant

So I went to see my local friendly accountant who basically said I was stupid to put my head in the sand, this was after a few notices of payment and red letters!

I was advised that I was ‘small fry’ (the sum I owed £3,500).

So I was told to ‘play’ on my situation, make them an offer I could mange each month and see what they would say.

So I prepared the letter with my grovels and sent it off.

Payment Schedule

Two weeks later a payment schedule was in my hands with all the usual garbage about how much they had considered my case. So my advice to anyone would be:-
1. speak to your accountant
2. state your case,
3. then go to HMRC or anyone else and see what they say.

Whats the worse that could happen?

UKContractor Comment

Lee has hit the nail on the head when it comes to contractors financial problems.

It is going to happen in a high percentage of Contractors’ careers that at some point they will get into some kind of financial trouble.

Contracting is not as plain sailing as most people think when they get into the industry in the first place.
Many look at their weekly rate for their first contract and multiple that by 50 (weeks) and then multiply that by the number of years they reckon it will take them to get out of the industry.

Out of Work for Longe Periods

It’s not as easy as that.

They may be out of work for long spells as a UK Contractor.

What many Contractors do when the bills start coming in that they can’t pay is to hide away and hope that they get back to work before any action happens over the bills.

What happens next is that the letters get more and more strident and threatening with each one sent usually ending up with them threatening that they will be sending in the bailiffs to take away your personal belongings etc.

The pressure is usually causing tensions at home, as well, and may cause friction in relationships. Many contractors have found that the end of a steady flow of cash means the end of relationships as well.

Contact An Accountant

As Lee states, when you are in financial trouble the first thing to do is to contact an accountant.
He (or she) is on your side.

They have also seen your predicament a thousand times. They may well laugh at your worries.

As Lee’s accountant said you are small fry to them. They are not going to waste lots of their precious time on someone who doesn’t have the money to pay.

As my Accountant once said to me when I was out of work and had no money to pay my bills during a downturn “What’s the worst they can do to you? They can’t shoot you. They won’t put you in jail unless you are lying to them. And they can’t take your money off you as you haven’t got any” he said with a laugh.

Reassuring Talk with Accountant

It’s always very reassuring to talk to your Accountant when you have contractors financial problems. It cheers you up.
There’s a whole load of things that they can suggest to help you like a payment plan, an IVA, closing your company (as it’s your company that owes the money) etc.

Never sit at home feeling depressed and annoying your family when you have contractors finacial problems.

In terms of Contractors Financial problems, talk to the people who know, i.e. Accountants.

You’ll find it very reassuring.



  1. I love all your articles! Just wondering if you would consider an article on contractor exit strategies. I recall you have already posted a story about one guy who built a successful waste business and left contracting for good. Some contractors I know plan to work until retirement in contracting on ever lucrative rates and spend accordingly (or forced to by their partners and end up in this cycle of hand to mouth) there is your oft comment that some multiply their day rates by 50 and by how many years till they can get out. So how much money in the bank/war chest would make contractors think this is enough? I know it is a personal decision but it is an interest close to my heart to see what others think about this.


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