Contractor (Service Company) Agreement
This Contractor (Service Company) Agreement is a generic agreement which can be used by a business for a variety of different contractor roles. It is designed to allow your business to obtain the services of an individual working through a personal service company or other intermediary company. In such a case that personal service company enters into the agreement with your business as the “Contractor” rather than the individual contracting direct with, or being employed by, your business.
Situations may arise where it may not be necessary or appropriate for you to employ staff on a permanent basis. An agreement such as this also allows for greater flexibility than permanent employment. A short term, renewable contract can assist your business in keeping its workforce in line with market demands.
The accompanying template, the Self-Employed Contractor Agreement (in the Self-Employed Agreements subfolder), is to be used instead when the contractor entering into the agreement with your business is an individual rather than a personal service company or other company.
This template 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 is regarded as an employee as opposed to a self-employed contractor.
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 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 contract but also on all other circumstances. Those circumstances may include the way in which the contract is implemented, and all arrangements between your business, 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 template, you and your proposed contractor take professional advice in relation to the particular circumstances as to any impact on the personal service company and the individual contractor of employment law, IR35, tax, and NIC rules.
A carefully worded agreement ensuring the independence of the personal service company 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 individual you initially deal with having to do the work, it is free to determine when, where and how work is completed (subject of course to your business’s requirements), and it is free to take on other clients.
This template is more basic than the Sales Contractor (Service Company) Agreement as it does not deal with commission.
The data protection provisions in this document have been updated in line with the UK GDPR.
Optional phrases and / or paragraphs are enclosed in square brackets.
This Contractor (Service Company) Agreement contains the following clauses:
2. Duration of the Agreement
3. Contractor’s Obligations
4. Nature of Appointment, and Engagement of Workers
7. Late Payment
8. Tax Liability
9. No Employment or Other Relationship
10. Exclusivity of Service and Competition
11. Confidential Information
12. Intellectual Property and Ownership of Materials
15. Force Majeure
16. Company Property
17. No waiver
18. Assignment and Subcontracting
19. Third Party Rights
21. Entire Agreement
22. Law and Jurisdiction
[23. Data Protection and Data Processing]
3. Data Protection and Data Processing
Annex to Schedule 3
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