Contract for services: freelance services (via a consultancy company) Client-friendly contract (England and Wales)
What's a contract for services: services provided via a consultancy company (client-friendly contract), and when do you need it?
This is a straightforward and basic contract for services agreement, suitable for freelancers, contractors and consultants who are contracting out their services via their own limited company. It provides a great basis to agree more detailed regularly provided service provisions if you wish to do so.
For example, you might want to:
- include not just a description of the Services, at Annex 2, but a table setting out a full Scope of works document with a breakdown of individual costings and delivery dates
- negotiate more detailed or complex ownership of intellectual property provisions.
If you’re looking to contract services with or as an individual freelancer or consultant, and not through a limited company, you’ll need our separate template contract for services: individual consultant, freelancer (sole trader).
You should also complete our template deed of assignment of intellectual property rights (IPRs), to ensure that the individual identified in this contract for services (i.e. the person whom you both intend will carry out the contracted services) also assigns the IPRs in whatever they individually create during the course of their duties to the customer. (See the doc guide note to clause 12 of this template for more detail about why this is very important.)
What else might you need?
It’s essential to distinguish contractors, who are self-employed, from employees, not least for tax reasons. Self-employed persons operate either as sole traders (who would use a contract for services for individual consultants) or as a part of their own limited company (and they’d use this template for those circumstances).
Self-employed contractors can choose what work they do, and they can decide when and where they complete the work. They are able to outsource work to others, they provide their own work equipment, and they often work for more than one client at a time. While sole traders are responsible for arranging for their own tax and National Insurance contributions, consultant contracting via a limited company will pay taxes and NI in a different way. Both types of consultant have fewer rights than employees.
It's important to ensure that a contractor is not an employee in disguise – even if that outcome is inadvertent. Getting it wrong can mean that both customer and consultant will face fines from HMRC under the IR35 rules. Use this handy tool designed by HMRC to ensure you've got it right. The wording of this template is carefully constructed to provide clarity about your respective intentions and to avoid ambiguity about the role that the consultant is to play. Of course, drafting in a document is one thing. You’ll need to ensure that your relationship in practice is consistent with what’s described in this document and conforms to the legal rules. Our guide Contractor or employee? Essential facts affecting freelancers and contractors, also provides helpful background, especially for those contracting their services through a limited company.
One of the most important rights when it comes to contracts for services, is the right for the freelancer to substitute someone else for the services that they have agreed to provide, and our guide explains this in detail. Given this, it’s also advisable to complete a Letter covering substitution and other practical arrangements for a consultant or freelancer, sometimes called a ‘real arrangements’ letter, to accompany any contract for services where the services will be provided via a limited company (or that the contents of this letter form an additional annex to the contract for services document). This letter covers the logistical and pragmatic arrangements that the parties will put in place to ensure that if the right of substitution is exercised by the freelancer/contractor, the contracted work continues without any avoidable disruption and the parties can evidence that the relationship is genuinely one at arms-length and not a disguised/inadvertent employment relationship. The letter usually won’t just cover the right of substitution and what happens when it is exercised. There will be other practical arrangements that it’s also advisable to cover in this side letter, such as clarifying attendance by the freelancer/contractor at meetings, specifying what facilities they can make use of and clarifying how they get set-up with what they need, to start performing the services.
If you have any questions at any stage, just select our Speak to a lawyer feature, and we’ll match you with one of our experts who can consider your particular intentions and make drafting or other recommendations.