MAKE YOUR FREE Consultancy agreement

Create a consultancy agreement to engage a consultant or to provide your services as a consultant.

This document is GDPR and IR35 compliant.

Recently reviewed by Lauren Delin, Solicitor. 

This consultancy agreement was last reviewed on 29 March 2022.

A consultancy agreement is a contract setting out the terms and conditions of an arrangement between a self-employed person (known as a ‘consultant’) and a client requiring the consultant's services. Consultancy services are wide-ranging and include advice from experts in certain areas (eg brand consulting or the services of an independent contractor, such as a freelance designer).

Use this consultancy agreement template:

• when you want to appoint a consultant to provide services on a self-employed basis

• when you are an individual wanting to provide services to a business on a self-employed basis

• when you want to appoint an individual consultant to provide services through an intermediary company

• when you are an individual wanting to provide services to a business through an intermediary company

• only for consultants based in England, Wales or Scotland

Ask a lawyer for more information about consultants based outside England, Wales or Scotland.

This consulting agreement template covers:

• client and consultant details

• the services to be provided by the consultant

• consultant substitution

• payment

• insurance and liability

• intellectual property, data protection and confidential information

• how to end the agreement

You should use this document when you hire a consultant (or want to provide your services as a consultant) and want to record the details of the arrangement. Find out more about using consultants, including what you should be aware of and the benefits of doing so. 

Make sure you create a formal agreement to ensure that both parties are clear on the consultant’s services as well as payment obligations. Having a consultancy contract will help protect you and your business on crucial issues such as ownership of intellectual property created by the consultant and data protection matters.

IR35 is a tax law introduced (by the Finance Act 2000) to tackle tax avoidance when consultants supply their services to clients via an 'intermediary', when the consultant would otherwise be considered an employee of the client. Intermediaries are parties making arrangements for or paying an individual to work for a third party (the client). Consultants often provide their services through limited company intermediaries (known as ‘personal service companies’ or ‘PSCs’).  For more information, read IR35.

IR35 applies to public authorities and private sector businesses. Since 6 April 2021, clients in the public sector and medium and large-sized clients in the private sector are responsible for determining a consultant's employment status (ie whether the consultant is genuinely self-employed for tax purposes).

If a client is a small company in the private sector, it is the intermediary's responsibility to determine the consultant's employment status for each contract.

Multiple factors contribute to whether a consultant is seen as an employee or not for IR35 purposes. For more information, read IR35 status determination. 

Where IR35 applies, the fees paid by the client to the consultant are treated as employment income and subject to income tax and National Insurance Contributions (NICs).

This document is IR35 compliant. A consultant engaged under this agreement is a consultant and not an employee.

If you need bespoke legal advice on determining a consultant’s status, get IR35 status determination advice.

A consultant provides expert knowledge in return for a fee. They tend to work in an advisory capacity and are usually some of the most knowledgeable people in their chosen field. Consultants tend to work in specialist industries, such as finance and technology and provide businesses with professional, expert advice.

A contractor, on the other hand, provides a specialist service in return for a fee. Contractors are used by organisations that wish to acquire a given skill set for a period of time, but which do not want to employ someone permanently. Unlike a consultant, a contractor will actually carry out physical work, although they may also advise on what that should be beforehand. The types of work they undertake include IT maintenance and support, cleaning services and security services.

Rocket Lawyer's consultancy agreement can be used for both consultants and contractors.

A consultant provides services on a self-employed basis as an independent contractor or freelancer to a client company. They are not an employee or a worker.

It is important to distinguish between an employee of a business and a consultant who provides services for your business. 

Consultants are not protected under employment law and are responsible for paying their own taxes. The relationship between a client and a consultant is simply contractual and subject to less statutory regulation than employment contracts. Employees are protected by a bundle of statutory employment rights and are paid through PAYE.

This agreement clearly indicates that this is a contract for services and that the consultant is an independent contractor.

For more information, read Consultants, workers and employees.

The client can choose if they will allow the consultant to work for competitors during the term of the agreement. The risk of creating an employment relationship if the consultant works for only one client is high. Allowing the consultant to work for others helps to avoid the risk of employee or worker status.

Under this agreement, a consultant is required to perform services using reasonable care and skill and to the best of their ability. A consultant must report the progress of any projects and attend any meetings, comply with laws, regulations, policies and procedures that are reasonably requested by a client.

This agreement allows you to specify the minimum amount of time a consultant must spend in order to perform the services for the client.

It is possible to choose whether a consultant can send a substitute in their place. If the nature of the services provided can be replaced, it is recommended that the consultant should find someone else to replace them. This avoids accidentally creating employment relationships.

A consultant is liable and has to indemnify the client for any loss, liability, costs, damages or expenses arising from a breach of duty or negligence.

You can choose to limit this liability to a maximum amount or the total amount paid by the client. However, in practice, liability limits can be difficult to enforce, especially if the client is a consumer. Therefore, this agreement requires the consultant to have adequate insurance in place. Read Limitation of liability clauses to find out more.

This contract can either be ended by written notice or immediately if one party is in breach. This document allows you to choose the notice period which is typically between 1-3 weeks. 

The client can terminate the agreement in writing immediately without notice or payment of compensation if the consultant (or the consultant’s representative):

• is guilty of any misconduct
• commits any repeated or fundamental breach of any terms of this agreement
• fails to comply with the customer's policies or any reasonable and lawful directions of the client
• is negligent or incompetent in performing the services
• commits a criminal offence or acts in any way dishonestly, whether or not while providing the services and it is likely that this will damage the reputation of the client
• is unable to provide services for 10 days in any one-month consecutive period by reason of incapacity
• is dissolved, goes into liquidation or bankruptcy or when a court administration order is made against them (if a company)

This agreement specifies the types of confidential information the consultant may be exposed to, such as client lists and business plans. A consultant is restricted from using, disclosing or allowing the use or disclosure of such information, without the client's prior written consent. The consultant must return or delete any confidential information when the agreement ends. 

The client is also under the same obligation of confidentiality regarding the consultant's confidential information.

This document expressly sets out that any intellectual property created by the consultant or their representative is owned by the client, or is held on trust by the consultant for the client. You can choose whether the client must pay the consultant in full before ownership is transferred.

The client is protected from any claims arising from the intellectual property by an indemnity from the consultant.

Ask a lawyer if the consultant:

• is involved in creating intellectual property central to the client's business
• is or may become a managed service company
• is based outside England, Wales or Scotland

This agreement is governed by the laws of England, Wales or Scotland.