Consultancy agreement for an IT contractor working through a limited company

An IT contractor working through a limited company is engaged by a client, or by an agency on the client's behalf, under a contract between two companies, and the agreement has to read as one: a defined piece of work, the contractor's company responsible for how it is done and by whom, a right to substitute that is real, and no obligations in either direction beyond the engagement. The off-payroll rules decide who assesses status; the agreement decides what there is to assess. I draft it, for the client or for the contractor, for a fixed fee of £595, delivered in five working days. The agreement reflects a business-to-business engagement, status is checked with HMRC's Check Employment Status for Tax tool against how the work is done, and no agreement can guarantee it.

Who this is for

Businesses in England and Wales engaging developers, engineers, architects and other IT specialists through their own companies, and contractors who want their own agreement to offer clients or a check on one they have been sent.

What matters in an IT contractor's consultancy agreement

The off-payroll rules and who determines status

Where the client is a medium or large business, Chapter 10 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 requires it to determine whether the engagement would be employment if the contractor were engaged directly, to issue a status determination statement with reasons, and, where it is, to have the fee-payer deduct tax and national insurance; where the client is small, the contractor's company assesses the engagement under Chapter 8. The agreement should state which applies, record the determination and the client's obligation to review it if the working practices change, and allocate the cost if HMRC disagrees.

The terms that reflect a business-to-business engagement

The contracting parties are the client (or agency) and the contractor's company, not the individual, and the agreement should say so, with the company responsible for providing the services through the named consultant or a substitute, for its own tax, insurance and equipment, for the quality of the work, and for correcting defects at its own cost; the client should have no obligation to offer further work and the company none to accept it, and the services should be defined as a project or a deliverable rather than a role.

Substitution, control and the working practices

A genuine right to send a suitably qualified substitute, with the client able to reject only on reasonable grounds and the company paying the substitute, is the single clause that most distinguishes a contractor from an employee, and it should be drafted to be usable; the agreement should also say that the company decides how the work is done, that the consultant is not subject to the client's disciplinary or performance processes, works their own hours within project needs, and uses their own equipment where security permits. The terms must match the practice: a substitution clause the client would never accept is evidence against the contractor.

Intellectual property and confidentiality

Code and documents the consultant writes belong to the contractor's company under the Copyright, Designs and Patents Act 1988 until assigned, and the agreement should assign the IP in the deliverables to the client on payment in writing under section 90, with the company's pre-existing tools licensed and open source identified; confidentiality should cover the client's systems and data, with the company acting as the client's processor under Article 28 of the UK GDPR where it handles personal data, and with the client's authorisation for the consultant's access to its systems recorded, which keeps the work within the Computer Misuse Act 1990.

Engagement through an agency and the opt-out

Where an agency supplies the contractor, there are two contracts, agency to client and agency to contractor's company, and the agency is an employment business under the Conduct of Employment Agencies and Employment Businesses Regulations 2003 unless the company and the consultant opt out under regulation 32 before being introduced; the agreement should say which contracts exist, that their terms are consistent (particularly on IP and substitution), who is the fee-payer under the off-payroll rules, and that the Agency Workers Regulations 2010 do not apply to a contractor who is self-employed in substance.

Money, notice, insurance and liability

The agreement should state the day rate, the days or hours expected, invoicing in arrears with timesheets or deliverables as evidence, payment terms with interest under the Late Payment of Commercial Debts (Interest) Act 1998, termination on notice by either party, and termination for breach; the company's liability should be capped at the fees paid in a stated period with consequential loss excluded, tested under section 11 of the Unfair Contract Terms Act 1977, and it should carry professional indemnity and public liability insurance at stated levels, with the client's own cover for its systems.

What it costs

Consultancy or contractor agreement, £595. Drafted for your business. Five working days.

Review of an agreement sent to you, £495. You are the contractor and want to know what you are signing. Returned marked up with the changes to ask for and an explanation. Three working days.

Buying online forms the engagement on payment. The scope is what the consultancy and contractor agreements page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• A clear, express assignment of intellectual property to your business
• Confidentiality provisions that protect your business information
• Restrictive covenants drafted at a scope a court will uphold
• Clear treatment of status, so the arrangement is not accidentally something else
• Payment, deliverables and termination provisions that match how you work
• A reusable structure, so the next engagement costs you nothing

What is not included

• Employment status determinations and off-payroll working assessments, which need your accountant
• Tax advice
• Disputes with a contractor you have already engaged
• Immigration and right to work compliance

Questions I am often asked

Our business is small. Who decides whether a contractor is inside the off-payroll rules?

The contractor's company, under the original rules in Chapter 8. If your business is medium or large, you decide and issue a determination statement. The agreement records which applies; the assessment itself is for the accountants with HMRC's tool.

Does a substitution clause make the contractor self-employed?

It helps only if it is real: a substitute could be sent, the client could not refuse without reason, and the company would pay them. A clause neither side would honour counts against the contractor. The agreement drafts one that can be used.

Should the contractor opt out of the Conduct Regulations?

That is the contractor's choice, made before the introduction. Opting out removes the agency's regulatory obligations to the contractor and is often requested by agencies; the agreement records the position either way.

Related guidance and services

• Consultancy and contractor agreements, £595, the service this page describes
• Contract review, £495
• Employment contracts and handbooks, £595
• Reviewing an umbrella company or agency contract as a contractor
• Getting an AI-drafted contractor agreement checked

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.