How to Write a Consultancy Agreement in England & Wales

Consultant, not employee

The central risk in a consultancy agreement is that the arrangement is really employment in disguise. A tribunal looks at the working practices, not just the label: mutuality of obligation, the degree of control the client exercises, and whether the consultant must perform the work personally all point towards employment. The agreement should confirm the consultant is an independent contractor, responsible for their own income tax and National Insurance, and not an employee, worker, or agent of the client.

A genuine right of substitution — the ability to send a suitably qualified replacement at the consultant's own cost — is one of the strongest indicators of self-employment. Where the services must be performed personally, that points the other way, so make the substitution clause match how the parties actually intend to work rather than pasting in wording that the day-to-day reality contradicts.

Off-payroll working (IR35)

Where the consultant contracts through a personal service company, the off-payroll working rules (IR35) decide whether the engagement should be taxed like employment. Who determines status depends on the size of the client. If the client is a small company, the consultant or their intermediary is responsible for assessing and operating IR35 where it applies.

If the client is a medium or large organisation, the responsibility shifts: the client must assess status and issue a Status Determination Statement, and where the engagement falls inside IR35 the parties operate PAYE deductions as required. A genuine sole trader sits outside these intermediary rules entirely. Because 'personal service' plus a high degree of client control tends to indicate inside-IR35 status, the substitution and control terms should be consistent with the status the parties have determined.

Assign the intellectual property

Unlike an employee, whose work product generally vests in the employer by default, a consultant retains ownership of what they create unless the agreement says otherwise. If the client needs to own the deliverables, the agreement must assign that intellectual property to the client with full title guarantee, with the consultant waiving moral rights and agreeing to execute any further documents needed to perfect the assignment.

Alternatives are common: the consultant may retain ownership and grant the client a perpetual, worldwide, non-exclusive licence, or the client may own the deliverables while the consultant keeps its pre-existing background IP and licenses only what is embedded in the work. Pick the model that matches the commercial deal, but be explicit — silence favours the consultant.

Fees and the Late Payment Act

Set out the fee basis clearly — day rate, fixed fee, or monthly retainer — and state whether the figures are inclusive of VAT or exclusive with VAT added where applicable. Specify the invoicing frequency and the payment period (commonly 14, 30, or 45 days), and address whether the client reimburses pre-approved expenses on receipts or the consultant bears its own costs.

Between businesses, late payment of undisputed sums carries statutory consequences under the Late Payment of Commercial Debts (Interest) Act 1998, which entitles the consultant to interest and fixed compensation on overdue invoices. Referencing this Act in the fees clause reinforces the right rather than creating it, and signals that prompt payment is expected.

Data protection under UK GDPR

If the consultant will process personal data on the client's behalf, the client is the controller and the consultant is a processor, and Article 28 of the UK GDPR requires specific written terms. The consultant must process the data only on the client's documented instructions (including on any transfer outside the UK), keep it secure with appropriate technical and organisational measures, and ensure that anyone authorised to process it is bound by confidentiality.

The terms must also restrict engaging sub-processors without the client's authorisation, require assistance with data-subject requests and the client's security, breach-notification and impact-assessment duties, oblige the consultant to notify the client without undue delay of a personal data breach and to submit to audits, and require the data to be deleted or returned at the end of the engagement. A confidentiality clause should sit alongside these terms; handling personal data without one is a gap worth closing.

1. 1.Confirm the consultant is genuinely self-employed and set the substitution term to match reality.
2. 2.Determine off-payroll (IR35) status by client size, and issue a Status Determination Statement if the client is medium or large.
3. 3.Choose the IP model and, where the client owns the work, assign it with full title guarantee and a moral-rights waiver.
4. 4.Set the fee basis, VAT treatment, invoicing and payment terms, and reference the Late Payment Act 1998.
5. 5.Add UK GDPR Article 28 processing terms and a confidentiality clause where the consultant handles personal data.
6. 6.State the term and notice, any restrictive covenants and liability cap, then have both parties sign and date.