Freelance / Independent Contractor Agreement

Overview

A freelance or independent contractor agreement is a contract for services under which a self-employed individual (or their own company) agrees to provide services to a client without becoming that client's employee. Getting the status right matters: unlike an employment contract, this agreement should reflect a genuine relationship of independence — English courts and tribunals look at the substance of the relationship, not just its label, using tests developed through case law (notably Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] and Autoclenz Ltd v Belcher [2011]). Employment status tests: the key indicators of genuine self-employment are (1) control — the contractor decides how, when and where the work is done, not the client; (2) substitution — the contractor has a genuine, unfettered right to send a substitute to do the work; and (3) mutuality of obligation — there is no ongoing obligation on the client to offer work or on the contractor to accept it, beyond the specific engagement. If the reality of the relationship looks like employment regardless of what the contract says, a tribunal can find the individual is actually an employee or a "worker" (an intermediate status with some but not all employment rights), with significant consequences for tax, National Insurance, and employment protections. IR35 / off-payroll working: where the contractor provides services through their own limited company (a "personal service company") to a medium or large private-sector client, Chapter 10 of the Income Tax (Earnings and Pensions) Act 2003 ("off-payroll working rules", commonly called IR35) shifts responsibility for determining employment status for tax purposes onto the client (the "end client"), who must issue a Status Determination Statement. If the determination is that the engagement would be employment if it were direct, the fee-payer must operate PAYE and National Insurance on payments to the contractor's company. Small private-sector clients (and all engagements with an individual contracting directly, not through a company) remain outside Chapter 10 and the older, contractor-self-assessed IR35 rules under Chapter 8 continue to apply instead. Key clauses: description of the services, a genuine substitution clause, absence of mutuality of obligation beyond the current engagement, fees and invoicing (contractors typically invoice for fees plus VAT if VAT-registered, rather than being paid salary through payroll), the contractor's responsibility for its own tax and National Insurance, equipment (contractors typically use their own), intellectual property in deliverables, confidentiality, and — where Chapter 10 applies — reference to the Status Determination Statement. Common pitfalls: drafting a contract that says "self-employed" while the actual working practices mirror employment (fixed hours, close supervision, no right of substitution) — the label does not override the substance; ignoring IR35/Chapter 10 status determination obligations where the client is a medium or large business and the contractor operates through a company; and failing to address who owns intellectual property in the work product, which for an independent contractor generally remains with the contractor absent an assignment clause.

Information to customize

• Client's name or company name

• Client's address

• Client size for IR35 purposes

  Small private-sector client (Chapter 8/contractor self-assesses), or medium/large private-sector or any public-sector client (Chapter 10 applies, client issues Status Determination Statement).

• Contractor's name or personal service company name

• Contractor's address

• Contractor's company number (if engaging via a personal service company)

• Description of the services

• Start date

• Term (fixed end date, or ongoing/rolling)

• Fees (day rate, project fee, etc.)

• Invoicing and payment terms

• Substitution clause (contractor's right to send a substitute)

• Who provides equipment/tools

  Typically the contractor, to support self-employed status.

• IR35 Status Determination Statement outcome (if Chapter 10 applies)

• Ownership of intellectual property in deliverables

• Date of signature

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Frequently asked questions

How do I know if someone is genuinely self-employed under English law?

Courts and tribunals look at the substance of the working relationship, not the contract's label, focusing on three main factors: control (does the contractor decide how/when/where to work), substitution (a genuine right to send someone else to do the work), and mutuality of obligation (no ongoing obligation to offer or accept future work).

What is IR35 / the off-payroll working rules?

IR35 (formally the off-payroll working rules in Chapter 10 of ITEPA 2003, for medium/large private-sector and public-sector clients) determines whether a contractor working through their own company would be an employee if engaged directly. If so, the client (or fee-payer) must operate PAYE and National Insurance on payments to the contractor's company.

Who decides IR35 status — the contractor or the client?

It depends on client size. For medium or large private-sector clients and all public-sector clients, the client must make the determination and issue a Status Determination Statement (Chapter 10). For small private-sector clients, the older Chapter 8 rules apply and the contractor's own company self-assesses status.

Can the client require the contractor to work fixed hours at the client's premises?

Doing so risks undermining self-employed status — close control over how, when and where work is done is one of the strongest indicators a tribunal will treat as employment, regardless of what the contract says.

Does the contractor need to be VAT-registered?

Only if the contractor's taxable turnover exceeds the current VAT registration threshold, or the contractor chooses to register voluntarily. If registered, VAT is added to invoices in addition to the agreed fee.

Who owns work created by the contractor?

In the absence of an express assignment clause, copyright and other IP in work created by an independent contractor generally remains with the contractor, not the client — this template lets the parties agree assignment or licensing explicitly.

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