Sales Contractor (Service Company) Agreement
Situations may often arise where a short term, renewable contract, and engagement of sales staff on a temporary basis, can assist a business in keeping its workforce in line with market demands.
It may not be necessary or appropriate in such situations for a business to acquire sales staff by engaging individuals as employees. This Sales Contractor (Service Company) Agreement allows a contractor to provide sales staff to a business rather than the business engaging employees to do so.
If you wish to use this document in a scenario that involves personal data, standard clauses for data protection and data processing are available in our UK GDPR & Data Protection Group.
This form of agreement therefore provides flexibility for a business in its engagement of sales staff. It is particularly useful in non-retail situations where the contractor is required to actively seek customers and sales and is rewarded by way of commission.
This document is designed to allow an individual to provide his/her sales services to businesses through a personal service company (or other intermediary company) used by the individual as opposed to the business employing or contracting with them direct. Under this document the personal service company or other intermediary company enters into the agreement as the contractor. The personal services or other intermediary company can nominate the individual and/or any other person/s to actually carry out the sales services for it.
The accompanying template, the Self Employed Sales Contractor Agreement, is to be used instead when the contractor entering into the agreement with the business is an individual sole trader (working as a self-employed individual) rather than a personal services or other intermediary company.
This template provides that the business does not have to pay taxes, national insurance contributions, pensions, benefits or similar, and that, the business instead pays a standard fee plus commission to the contractor company which then pays any sums due in respect of tax, national insurance etc. If the business is found liable to HMRC for any tax etc, the company must indemnify the business.
This form of agreement aims to reduce the risk of the individual being deemed to be an employee of the business. Nevertheless, he might still be treated by HMRC or a tribunal, court or 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 the 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 form of agreement, you take professional legal advice in relation to your particular circumstances as to any impact on the company and the individual of IR35, tax, NIC and any other applicable laws or rules.
Further guidance on the legal status of an individual who works as a contractor through an intermediary company can be found here but we still recommend that you take professional legal and tax advice before using this form of document.
Nevertheless, a carefully worded contract ensuring the independence of the personal service company 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 individual having to do some or all of the work, it is free to determine when, where and how work is completed (subject of course to the business’s requirements), and it is free to take on other clients.
The services that the contractor provides can include referring customers or orders to your business. It does not and should not include accepting any order or entering into any contract of sale with a customer on behalf of your business. If it does not, then the contractor will not be a “commercial agent” for the purposes of the Commercial Agents (Council Directive) Regulations 1993.
Optional phrases and / or paragraphs are enclosed in square brackets.
This Sales Contractor (Service Company) Agreement contains the following clauses:
2. Duration of the Agreement
3. Contractor’s Obligations
5. Sales and Commission
7. Late Payment
8. Tax Liabilities
9. Status of Contractor and its personnel
11. Confidential Information
12. Intellectual Property
14. Force Majeure
15. No Waiver
16. Assignment and Subcontracting
17. Third Party Rights
19. Company Property
21. Entire Agreement
22. Law and Jurisdiction
and an optional Schedule of Services.
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