Consultancy Agreements

Preparation of a consultancy agreement via a personal service company for the provision of technical support, product advice, and customer services to a software development business.

Drafting an international consultancy agreement addressing both service provision and the licensing of intellectual property and know-how in the orthotist and prosthetist industry

Advising an IT consultancy on service provision to a global fashion retailer, with a focus on risk management and commercial alignment.

Advising and drafting consultancy appointment terms for a construction business engaged in a major UK-wide project.

Assisting a management company in structuring a cross-border consultancy services agreement covering outsourced financial and operational management.

Reviewing and advising on a consultancy agreement for a national supplier of wood plastic composite products, focusing on liability, scope of services, and termination provisions.

The question of whether the consultant is self-employed is important, as this will determine how its income is taxed and whether the consultant is entitled to additional rights from the client on the basis that they are an employee.

There is no single test for determining the employment status of a consultant, or whether the consultant is self-employed. From a legal and tax perspective, the day-to-day reality of the relationship (rather than the contract or any labels the parties have given to the relationship) will determine this.

It is essential to seek early legal advice before engaging a consultant to explore these issues.

Consultants are ordinarily paid on a time and materials basis. In order to maintain a genuine consultancy relationship (and not one of employment), the consultant’s invoices ideally should be issued ad hoc (not at regular monthly intervals) and should be for different amounts each time, depending on the work completed by the consultant.

The consultancy agreement should stipulate who is liable for the payment of VAT or other taxes. If the consultancy relationship involves an international element, local law advice may be required as the requirement to withhold sums for tax purposes can vary within jurisdictions.

The consultancy agreement should make clear who owns the intellectual property rights (IPR) in what the consultant creates. Without such express written agreement on this issue, any IPR created by the consultant will, by default, be the property of the consultant as the author/creator.

Depending on the circumstances, the client may be liable for any losses or harm a consultant causes if the consultant was acting on the behalf of the client at the time such loss or harm occurred. A consultancy agreement can place a consultant under an obligation to maintain insurance to cover any of their acts and indemnify the client for any losses or harm the client may incur.

A consulting agreement is a type of contract used when hiring someone in a self-employed, independent capacity. A consultant works for themselves, not as an employee, and is not entitled to employment benefits like holiday pay or sick leave.

An employment contract, by contrast, creates an employer-employee relationship with legal rights and protections under UK employment law.

It is important to be aware that simply calling an arrangement a consultancy is not sufficient in itself to prevent that arrangement being treated as an employment relationship if, in practice, it has the markers of employment.  This classification has legal and tax implications so it is important to consider how the arrangement is likely to be analysed before the engagement starts.

Both terms are generally used to refer to individuals who are self-employed and work under a contract for services rather than as employees.   There are some differences in the common usage of the two terms:

Contractors typically carry out hands-on, task-specific work (e.g., software development, construction).

Consultants are generally engaged to provide strategic advice or specialist expertise (e.g., management consultancy, marketing strategy).

From a legal standpoint, however, the terms are often used interchangeably.