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A Consultancy Agreement is a document between an independent contractor (the Consultant) and an entity (the Client) for the provision of consultancy services. In a Consultancy Agreement, the independent contractor is referred to as the Consultant and generally agrees to carry out business consulting for the client.
The consulting services of the Consultant under this agreement involve assisting the client with whatever is described or outlined in the agreement. The consulting relationship can be of any type such as general business operations, marketing, human resources, strategy, financial consulting, etc.
This Consultancy Agreement is to be used where the Consultant will not be deemed to be an employee of the Client for the duration of the agreement for the purposes of the IR35 or off-payroll working rules. For a contract where the person would be hired to serve or act as an employee of the organisation, an employment contract will be most suitable.
The UK's IR35 regime
The UK's IR35 regime applies where a person (the Consultant) is providing a service for another person (the Client) and those services are not being performed under a direct contract between the person and the Client but as an Independent Contractor or through an intermediary (usually a limited company).
The effect of using an intermediary is that the Consultant is not treated as an employee of the client for the period where the services are being performed or provided which in turn will mean that the income tax and NI (national insurance) contributions will not apply as they should in an employer-employee relationship. Because this arrangement may be beneficial to both the Client and the Contractor as relates to tax liabilities and employment obligations, the IR35 functions to limit the way parties utilise these arrangements to evade these statutory obligations. Hence, where the parties are keen to contract outside of the IR35 regime, this consultancy agreement has been drafted with such considerations in mind to make sure that the relationship between the Consultant and Client is not, in practice, interpreted as that of an employer and an employee.
Personal Service Company as the Consultant
Under this type of agreement, the Consultant can either provide the consulting services themselves as an individual, or they can use an intermediary (usually referred to as a personal service company). A Personal Service Company refers to a limited company whose main shareholder is also a director and that person uses the limited company to take up businesses and provide services to clients, instead of working directly with clients in a personal capacity or taking up employment. In other words, the Personal Service Company is used as a means through which the main shareholder transacts with clients.
Under either option, the Consultant will not be deemed to be employed by the Client.
How to use this document
In this Consultancy Agreement, the Consultant and the Client will outline their respective expectations and agree to be bound by the duties and obligations imposed on them by this relationship which is governed by this agreement.
The most important details under such a Consultancy Agreement which must be entered are as follows:
As this document is best suited for a specific consultant and client relationship, it is, therefore, important to ensure that this agreement is the most suitable for the kind of relationship that will exist between the parties. An alternative for non-employee service providers is a Services Contract which is used where the service being provided is not a consulting service.
When this agreement is filed out, it should be printed, and signed by both parties and a copy should be kept with each party.
This Consultancy Agreement can be used in either the jurisdictions of England and Wales or Scotland. The user can select the appropriate jurisdiction in which they want to enforce this agreement. If the parties to this consultancy agreement are in England and Wales or wish for the laws of England and Wales to preside over this consultancy agremeent, the user should select the jurisdiction of England and Wales. Conversely, if the parties to this consultancy agreement are in Scotland or wish for the laws of Scotland to preside over this consultancy agreement, the user should select the jurisdiction of Scotland.
Applicable law
Contracts (Rights of Third Parties) Act 1999
Contracts (Rights of Third Parties) (Scotland) Act 2017
Income Tax (Earnings and Pensions) Act 2003
Supply of Goods and Services Act 1982
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A guide to help you: Differences between an Employment Contract, Service Contract and Consulting Agreement
Other names for the document: Consultancy Agreement - United Kingdom, Independent Consultant Contract - Scotland, Consulting Services Agreement - Scotland, Agreement for the Provision of Consulting Services, Contract for the Provision of Consulting Services
Country: United Kingdom