Consultancy Agreements Tailored to Your Business
A consultancy agreement is a contract between your business and an independent consultant you engage to provide services. It sets out the terms of the working relationship, protects your business, and gives the consultant certainty about what is expected. If you engage consultants without a written agreement in place, you are taking an unnecessary risk.
We draft consultancy agreements for businesses of all sizes, from early-stage startups to established companies bringing in senior expertise on a project basis.
What Is a Consultancy Agreement?
A consultancy agreement (sometimes called a consultant contract or contractor agreement) is a legally binding contract between a business and a self-employed individual or consultancy firm. Unlike an employment contract, it governs a commercial relationship rather than an employment one. The consultant is not an employee; they are an independent contractor providing services under agreed terms.
This distinction matters for several reasons. Tax treatment, intellectual property ownership, and the obligations each party owes the other all depend on the relationship being correctly documented. A poorly drafted agreement can blur those lines and create problems you did not anticipate.
When Do You Need a Consultancy Agreement?
You need one whenever you engage an individual or firm to provide services on a self-employed basis. That includes one-off project work, ongoing retained arrangements, and short-term specialist engagements.
Common scenarios include bringing in a fractional CFO, engaging a marketing consultant, commissioning a software developer, or retaining an industry expert to support a specific project. In each case, the consultancy agreement is the document that defines the relationship and manages the risk on both sides.
Startups often assume informal arrangements will do for the early stages. They rarely do. If you are working with a startup lawyer to structure your business, getting consultancy agreements right from the outset is part of that process.
What a Consultancy Agreement Should Include
A well-drafted consultancy agreement covers the full scope of the relationship. Here is what should be included and why each element matters.
Scope of Services
This defines exactly what the consultant is being engaged to do. It should be specific. Vague descriptions of services lead to disputes about what was and was not agreed. A clear scope also helps you manage deliverables and assess performance.
Fees and Payment Terms
The agreement should set out the consultant’s fee, whether that is a day rate, a fixed project fee, or a retainer. Payment terms, invoicing arrangements, and any expenses policy should all be addressed. This protects both parties and avoids any ambiguity about what is owed and when.
Duration and Termination
The agreement should state when the engagement starts, how long it runs, and how either party can bring it to an end. Termination provisions are particularly important. You want the ability to end the relationship if things are not working, but you also need to give the consultant reasonable notice. Both parties benefit from clarity here.
Intellectual Property Rights
Intellectual property (IP) refers to creative and commercial output, including designs, written content, software, strategies, and other work product. In an employment relationship, IP created in the course of work usually belongs to the employer automatically. That is not the case with consultants.
Without an explicit IP assignment clause in your consultancy agreement, work produced by the consultant may belong to them, not to your company. This is one of the most important provisions in any consultant contract and one that is frequently overlooked in informal arrangements.
Confidentiality
Consultants often have access to sensitive business information, from financial data to client lists to strategic plans. A confidentiality clause requires the consultant to keep that information private during and after the engagement. It is a standard and essential provision.
Restrictive Covenants
Restrictive covenants are clauses that limit what the consultant can do after the engagement ends. For example, a non-solicitation clause (one that prevents the consultant from approaching your clients or staff) or a non-compete clause (one that restricts them from working for a direct competitor for a defined period). These need to be carefully drafted to be enforceable; a blanket restriction that is too wide will not hold up.
IR35 and Employment Status
IR35 is a set of tax rules designed to prevent disguised employment, where someone works as a self-employed contractor but in practice operates like an employee. If IR35 applies, the tax consequences are significant for both parties. The way you structure and document the engagement matters.
Your consultancy agreement should reflect a genuine independent contractor relationship. If the day-to-day reality of the arrangement does not match what is in the contract, HMRC (the UK’s tax authority) may take a different view. We can help you structure the agreement appropriately.
Data Protection
If the consultant handles personal data on your behalf, data protection obligations under UK GDPR (the UK’s data protection law) apply. The agreement should address this, including provisions about how data is handled and kept secure. Our data protection solicitors can advise where this is a significant part of the engagement.
Why Use JPP Law to Draft Your Consultancy Agreement?
Consultancy agreements sit at the crossroads of contract law, employment law, intellectual property, and tax. Getting them right requires experience across all of those areas.
Our solicitors have acted for businesses of all kinds, from founder-led startups to large corporates. We understand what a workable consultancy agreement looks like in practice, not just in theory. We draft agreements that protect your position without being unnecessarily heavy or off-putting to the consultant. It is one of a range of commercial contracts we prepare for clients.
It is also worth noting that consultancy agreements often raise questions that touch on employment law. If there is any doubt about whether an individual should be engaged as a consultant or employed, an employment law solicitor can advise on the appropriate structure before the form of the relationship, employment or consultancy, is decided.
We work with businesses at every stage. Whether you are a growing company formalising your first consultant relationships or an established business reviewing your standard template, we can help.
FAQs
What is the difference between a consultancy agreement and an employment contract?
A consultancy agreement governs a commercial relationship between a business and a self-employed individual or firm. An employment contract creates an employment relationship. The distinction matters because employees have statutory rights (rights granted by law, such as unfair dismissal protection and paid holiday) that consultants do not automatically have. The IR35 rules also mean that the substance of the relationship, not just the label, determines how it is treated for tax purposes. If you are unsure which arrangement is appropriate, we can advise before you commit to either.
Can I use a template consultancy agreement I find online?
You can, but there are real risks. Generic templates are not tailored to your business, the specific services being provided, or the risk profile of the engagement. Provisions on intellectual property, restrictive covenants, and IR35 in particular need to reflect the actual arrangement. A template that does not account for those factors may leave you exposed. Having a solicitor draft or review the agreement is a relatively modest investment compared to the cost of resolving a dispute or an HMRC inquiry later.
To have a consultancy agreement drafted or reviewed, book an introductory call with one of our commercial solicitors.
