Consultancy Agreement Solicitors

What is a Consultancy Agreement?

A consultancy agreement is a contract between a business and an independent consultant, often engaged via a PSC or another service provider. It governs the relationship and sets out the broad terms under which services will be provided, from deliverables and timescales to intellectual property ownership, fees and liability.

Unlike employment contracts, consultancy agreements generally allow more flexibility for both parties and fewer employment law obligations, but a consultancy agreement needs to reflect the reality of the working relationship and it is crucial to get the terms right and to include appropriate protections.

A consultancy agreement helps clarify the intended status of the parties, protect your commercial interests, and ensure both sides understand their obligations.

How We Help

We support businesses of all sizes and individuals with bespoke consultancy agreements that strike the right balance between commercial freedom and legal protection. Our Commercial and Employment experts work closely together to ensure your contracts stand up to scrutiny and reflect how your consultancy relationships work in practice.

Whether you’re hiring a consultant for a short-term project or need longer-term expertise, we’ll help you structure the arrangement safely and strategically.

Why Are Consultancy Agreements Important?

Consultancy agreements are not just formalities, they document the parties intentions regarding the intended relationship, provide legal clarity and reduce the risk of disputes, misaligned expectations, or claims of employment rights. Without a properly drafted contract, businesses may face issues around:

• Employment status
• IP ownership of deliverables
• Liability for PAYE and National Insurance
• Confidentiality breaches
• Employment tribunal claims
• Lack of clarity on scope, fees or service standards

We draft agreements that are clear while also being fair and practical for both parties. Importantly, we also ensure that the written terms align with how the relationship works day to day.

Common Types of Consultancy Arrangements

Individual consultancy agreement:

A direct agreement with an individual consultant who operates independently and is not in an employment relationship. This must be carefully drafted to avoid blurring employment lines.

Consultancy via a service company (PSC):

The business contracts with a limited company (often owned by the consultant), which then provides the services. This can be tax-efficient for the consultant but requires clear contractual arrangements, especially around substitution and responsibility for liabilities.

Consultancy firms or third-party providers:

For longer-term or high-value projects, businesses may engage a consultancy firm. In these cases, a supply of services agreement with clearly defined deliverables and SLAs may be more appropriate than a standard consultancy contract.

What Should a Consultancy Agreement Include?

A typical consultancy agreement will include:

• Duties and Deliverables: Clear scope of work, timescales, milestones, and expected standards.
• Payment Terms: Fixed fee, hourly/daily rates or outcome-based payments, plus VAT obligations.
• Substitution Rights: Whether and how a substitute can be appointed, and who approves them.
• Confidentiality: Tailored clauses covering trade secrets, data, and business-sensitive information.
• IP Ownership: Assigning any intellectual property rights in materials or outputs to your business.
• Indemnities: Covering financial losses from breach, IP infringement, or tax liabilities.
• Insurance: Requiring the consultant to maintain professional indemnity or other insurance.
• Employment Status Statement: Clarifying the intended nature of the relationship.

Each agreement should reflect the reality of the working relationship, not just the preferred legal label. Courts and tax authorities will look at factors such as control, substitution, mutuality of obligation and allocation of financial risk when assessing status.