IT Subcontractor (Company) Agreement

IT Subcontractor (Company) Agreement

BS.IT.SCONT.01B

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 by IT specialists working on a sub-contractor basis through a personal service company (or other intermediary company) and 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 document is designed for use alongside the IT Service Agreement, also available from Simply-Docs. 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 and liability.

This template is designed for use where an individual IT specialist, working through a personal service company or other intermediary company, provides his services to a main contractor. That intermediary company enters into the sub-contract agreement as the Sub-Contractor rather than the main contractor contracting with, or employing, the individual IT specialist direct. The template, the Self-employed IT Consultant Agreement in the General Consultancy Agreements subfolder, 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 agreement emphasises the independent status of the intermediary sub-contractor company. Subject to the requirements dictated by the nature of the IT services, the sub-contractor company retains a degree of independence in decision-making, and it may at any time engage another IT specialist and substitute him for the individual IT consultant.

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.

his 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 in this Group 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. Unlike an employee, the company is an independent contractor which is free to provide any suitably qualified person (rather than only the original individual named in the sub-contract having to do the work), it is free to determine when, where and how work is completed (subject of course to the main contractor’s and its client’s requirements), and it is free to work for other clients or main contractors.

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. No Waiver

18. Further Assurance

19. Costs

20. Assignment and Sub-Contracting

21. Time

22. Relationship of the Parties

23. Third Party Rights

24. Notices

25. Entire Agreement

26. Counterparts

27. Severance

28. Dispute Resolution

29. 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]

This document is in open format. Either enter the requisite details in the highlighted fields or adjust the wording to suit your purposes. 

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