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Consultancy Agreement
Drafted with IR35 (Chapter 8 and Chapter 10) in mind
A consultancy agreement for engaging a consultant through a personal services company on a project basis. IR35-aware framework, consultant-owned IP with licence-back to the Client, and a capped indemnity that accounts for the 6 April 2024 statutory set-off rules.
What's included
- ✓Parties (Client and Consultant) with Named Consultant identification
- ✓Scope of consultancy services with advisory-only framing
- ✓Three-instalment fee structure (deposit, midpoint, final)
- ✓Substitution right structured to support outside-IR35 working pattern
- ✓Conditional IR35 framework (Chapter 8 and Chapter 10) with consultant warranty
- ✓Capped IR35 indemnity accounting for statutory set-off
- ✓Consultant-owned Project IP with perpetual licence to Client for internal use
- ✓Chain-of-title obligations for any subcontracted IP contributors
- ✓Confidentiality (5 years general, indefinite for trade secrets)
- ✓UK GDPR placeholder with no-processing-until-DPA condition
- ✓Compliance with the Bribery Act 2010 and Criminal Finances Act 2017
- ✓Liability cap (greater of fees paid or payable and £15,000)
- ✓30-day termination on notice
- ✓12-month mutual non-solicitation
- ✓Force majeure clause
Recent legal changes
This consultancy agreement is drafted for a B2B engagement between a Client and a Consultant operating through a personal services company. The IR35 framework is treated conditionally: where Chapter 10 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 applies (medium and large non-public-sector clients, and all public-sector clients), the Client makes the status determination. Where Chapter 10 does not apply (small non-public-sector clients), each party complies with its own intermediaries obligations under Chapter 8. The contract includes a substitution right structured to support an outside-IR35 working pattern, a capped IR35 indemnity that accounts for the 6 April 2024 statutory set-off rules, and a consultant-owned IP model with a perpetual non-exclusive licence to the Client for internal business use.
What is a Consultancy Agreement?
A consultancy agreement is a contract between a Client and a Consultant (typically operating through a Ltd company) setting out the scope of advisory services, fees, payment milestones, intellectual property arrangements, IR35 framework, and termination rights. It governs both the commercial relationship and the documentation of the engagement for IR35 purposes.
When do you need one?
You need a consultancy agreement when engaging a senior advisor, strategic consultant, or subject-matter expert through their personal services company on a project basis. The contract is particularly important where the engagement may fall within the scope of the off-payroll working rules.
Last updated: 20 May 2026
Frequently asked questions
Who owns the intellectual property created during a consultancy engagement?
Under this agreement, the Consultant retains ownership of all intellectual property created during the engagement (frameworks, methodologies, models, templates, working papers, and deliverables). The Client receives a perpetual, irrevocable, worldwide, royalty-free, non-exclusive licence to use the work for internal business operations — including use by group companies and external advisers — but cannot sublicense, resell, or commercially exploit the work without the Consultant's written consent. This is the standard market position for senior consultancy engagements and reflects the commercial reality that consultants reuse methodologies across clients.
How does the IR35 framework apply to a consultancy engagement?
The agreement is drafted to operate on a genuine business-to-business basis. Where Chapter 10 of the off-payroll working rules applies (medium and large non-public-sector clients, and all public-sector clients), the Client is responsible for making the status determination and issuing a status determination statement. Where Chapter 10 does not apply (small non-public-sector clients), each party complies with its own obligations under the Chapter 8 intermediaries legislation. The contract includes a substitution right and an advisory-only framing that support an outside-IR35 working pattern, but the actual status determination depends on working practices, not the contract alone.
What is the IR35 indemnity capped at?
The indemnity in clause 5.5 covers amounts assessed by HMRC under the off-payroll or intermediaries legislation, but only to the extent directly caused by the Consultant's fraud, deliberate default, or material breach. It accounts for the statutory set-off rules introduced on 6 April 2024 so that tax and NICs already paid by the worker or intermediary are taken into account. The indemnity is capped at 125% of the Fees paid or payable under the agreement — a proportionate ceiling for the engagement value, rather than the uncapped exposure seen in some templates.
How is this different from a freelance services agreement?
A consultancy agreement is positioned for advisory engagements where the consultant provides recommendations within their area of expertise and the client retains all decision-making authority. The freelance services agreement is positioned for execution-led engagements where the freelancer produces specific deliverables. The two contracts also differ on intellectual property (consultant-owned with licence-back vs assignment to client), termination notice (30 days vs 14 days), payment structure (three milestone-linked instalments vs two), and IR35 treatment (explicit framework with capped indemnity vs no representation on status).