IT Subcontractor (Company) Agreement

The data protection provisions in this document have been updated with reference to the UK GDPR.

When dealing with specialist services such as IT services, it may often be the case that a service provider (or “main contractor” in this context) wishes to sub-contract all or part of the services they are contracted to provide.

This IT Sub-Contractor (Company) Agreement is designed for use where an individual IT specialist (“Principal Consultant”) works on a sub-contractor basis through a personal service (or other intermediary) company. That intermediary company enters into this form of Agreement as the Sub-Contractor rather than the main contractor contracting with, or employing, the individual direct.

Under this template, unlike an employee, the intermediary company is free as an independent contractor to provide any suitably qualified person (a “Consultant”) rather than only the original individual (“Principal Consultant”) named in the sub-contract having to do some or all of the work if the Principal Consultant had been engaged direct as an employee. The Subcontractor intermediary company is free under this template to determine when, where and how work is completed (subject of course to the main contractor’s and its client’s requirements). The IT Subcontractor is free to work for other clients or main contractors.

This IT Sub-Contractor (Company) Agreement has been designed to be sufficiently broad to cover a range of different types of work. The specific details which will be unique to each transaction should be provided in a series of schedules, outside the main body of the sub-contract.

This form of agreement may be used alongside the IT Service Agreement . The clauses in each document are designed to mirror and/or complement each other. In particular, this IT Sub-Contractor (Company) Agreement includes a provision to the effect that it will not come into force until the main contract does and will terminate automatically in the event that the main contract is terminated (subject, of course, to the obligation to make reasonable payment for any work already completed by the sub-contractor).

Other key provisions in this form of agreement cover elements such as fees and payment, insurance, confidentiality, data protection, and liability.

The accompanying Self-Employed IT Consultant Agreement template is to be used instead when the sub-contractor entering into the agreement with the main contractor is a sole trader (working as a self-employed individual) rather than an intermediary company.

This template provides that the main contractor does not have to pay taxes, national insurance contributions, pensions, benefits or similar, and that, instead, the main contractor pays fees to the sub-contractor who then pays any sums due in respect of tax, national insurance etc.

This document aims to reduce the risk (both to the individual and the personal service (or other intermediary) company that, under employment law and any other applicable law, the individual IT consultant is regarded as an employee. Nevertheless, he might still be treated by HMRC, an employment tribunal, or any other body, as an employee, and legislation (such as IR35 or other rules) might still apply in a way which adversely impacts the individual’s or his personal service company’s legal, tax or NIC position. Whether that is so will depend not just on what is contained in the sub-contract but also on all other circumstances. Those circumstances may include the way in which the sub-contract is implemented, and all arrangements between the main contractor, the personal service (or other intermediary) company, and the individual.

HMRC provides some guidance on its website about employment, self-employment, and IR35. Its decisions on these points are often based on a “balancing exercise” in which it gives weightings to various factors. However, neither the HMRC guidance nor case law are sufficiently precise to enable anyone to predict how in any particular case the “balancing exercise” would be carried out or what HMRC’s conclusion would be about that particular case. For that reason we recommend that before you decide to use or adapt this form of agreement, you take professional legal and tax advice in relation to your particular circumstances as to any impact on the company and the individual of employment law, IR35, tax, and NIC rules.

Further guidance on tax and employment status of an individual who works (as a subcontractor or contractor) through an intermediary company can be found in the Guidance Note relating to Self-employment and IR35, but we still recommend that you take professional legal and tax advice before using this form of document.

Nevertheless, a carefully worded sub-contract ensuring the independence of the personal service company sub-contractor is still a key starting point.

Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.

This IT Sub-Contractor (Company) Agreement contains the following clauses:

1. Definitions and Interpretation

2. Commencement Date

3. Engagement of the Sub-Contractor

4. Status of the Sub-Contractor

5. Sub-Contractor’s Obligations

6. Service Provider’s Obligations

7. Provision of Equipment

8. Insurance

9. Fees and Payment

10. Indemnity

11. Liability

12. Confidentiality

13. Non-Solicitation

14. Force Majeure

15. Term and Termination

16. Effects of Termination

17. Data Protection

18. Data Processing

19 No Waiver

20. Further Assurance

21. Costs

22. Assignment and Sub-Contracting

23. Time

24. Relationship of the Parties

25. Third Party Rights

26. Notices

27. Entire Agreement

28. Counterparts

29. Severance

30. Dispute Resolution

31. Law and Jurisdiction

and the following schedules:

1. The Main Contract
2. The Sub-Contracted Services
3. Equipment
4. Software
5. Sub-Contractor’s Fees
6. [Insurance]
7. [Data Processing]

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