Members of the gig economy are leaving their clients and family members vulnerable by failing to prepare for their own death, according to a leading solicitor.

John-Paul Dennis from Kirwans law firm, has voiced his concerns about the lack of succession planning taking place by freelancers who don’t fully understand the complex web of legal issues that could emerge should they pass away unexpectedly.

It’s a concern that’s becoming more and more pressing as the gig economy – which sees workers paid for one-off ‘gigs’ rather than ongoing contracts – continues to grow, according to Dennis.

“For most freelancers, the main concern is where their next piece of work or client is going to come from,” he says. “So planning for the time when they may not be around generally comes low down on their list of priorities. However, imagining the worst case scenario can bring this issue sharply into focus.”

“Imagine a situation in which a single person business contracted to several clients dies or becomes mentally incapacitated without warning. Several questions immediately emerge; where does that leave the client? How can they access confidential documents relevant to them that may be stored on the freelancer’s computer? If the freelancer concerned had taken on a project management role, how will their death or incapacitation affect the project as a whole? What are the ramifications of that?”

These are just some of the concerns of the clients. For family members, the problems could be more acute, says Dennis.

“How do they access the freelancer’s business account to ensure they have a continued income? What about work that is still to be invoiced? Or invoices that are still to be paid? What are their obligations to HMRC? How do they go about winding up the company? The pressure that these sorts of issues can place on grieving families cannot be underestimated.”

So how can freelancers prevent their unexpected exit from the business from triggering commercial devastation?

“It’s all about planning,” explains Dennis. “There are measures that can be put in place to ensure that, should the worst happen, all parties are protected. But it does require the person concerned to spend some time thinking about the ramifications of their death in a business context, and to seek advice on how such problems could be combatted.”

Here, John-Paul Dennis, along with Kirwans’ corporate and commercial solicitor James Pressley, outline how to get started on planning ahead.

Create a list

Imagining your own death is never going to be the most pleasant of experiences, but for individual traders, it is key. Write a list of all the people, both in a personal and professional capacity, who would be affected by your unexpected exit from your business, and the ramifications it would have on them. Think your partner having to deal with the tax office, or your client who is relying on your work to complete a project on time; if your death would impact on them in some way, then write it down.

Next, look at actions that can be taken while you’re still alive to guide people through the relevant processes in the case of your death. Whatever the potential problem, now is the time to find a solution.

Arrange for a trusted person to take over your business affairs

Arranging a property and financial affairs lasting power of attorney (LPA) means appointing someone to make decisions on your behalf. That includes dealing with business matters, and ensuring that suppliers are paid and drawings can be made to joint accounts you may share with your spouse or dependant. It also means they can deal with HMRC to cover any outstanding tax you may owe, and dissolve your company, if necessary.

Leave your trusted representative a guide

The likelihood is that your chosen representative will struggle to know where to start when it comes to dealing with handling the business red tape that death can bring. To assist them in this mammoth task, it is crucial to leave them a guide as to the actions they’ll need to take.

Directing them to HMRC is a start; they will be able to advise on tax matters, including any tax that needs to be collected or repayed, and whether they need to fill in a self-assessment on your behalf.

The tax office’s bereavement tool will also prove invaluable in helping your representative to understand which forms they need to fill in, while the NI Contributions Office should also be contacted on 0300 200 3500 to cancel your NI payments. Your representative may also need to check with a solicitor as to whether inheritance tax is due on your estate. In addition the Department for Work and Pensions (DWP) should be made aware of your death so that they can cancel your state pension.

This is just a taste of some of the issues that your representative will need to deal with, so the more direction you can set out for them, the better. 

Create shared drives

For a smooth handover, upload documents to a shared online drive for your representative and clients and regularly upload all the files they may need to help operations continue smoothly upon your exit from the business. This could include ongoing records of client and supplier invoices, or key pieces of information about projects.

Get any data protection issues ironed out

If you are simply doing short-term project work for a larger organisation, then that organisation will be classed as the ‘data controller’ and, as such, will be responsible for the data. However, if you also have your own clients, and keep a homemade database of their personal data, then you are the data controller and, as such, should be registered with the Data Commissioner’s Office.

According to the seventh principle of the Data Protection Act 1998, the Information Commissioner’s Office would expect all ‘data controllers’ to have a policy in place with regards to how that data will be dealt with in the event that you die or become incapacitated; however, the likelihood is that most gig economy workers will not spend the time or money becoming embroiled creating such a plan.

If a person dies, leaving a database of clients’ personal information on their computer, there does not seem to be a clear picture on who is responsible for dealing with it.

It could be that the executors sell that database of information to someone else in the same line of business, which would be a valid disposition of that personal data. If not, then according to the fifth principle of the Data Protection Act 1998 (retention), it would need to be destroyed.

If the data is held on a cloud-based system, as referred to above, then your will may need to be revisited, as most wills made before 2014 do not include a power to deal with digital intangible assets.