Contractor agreement UK: what to check and how IR35 affects you
Contracting in the UK involves navigating both commercial contract terms and the IR35 tax rules that determine whether HMRC treats you as effectively employed for tax purposes. Getting both right matters — a poorly drafted contract can expose you to unexpected tax liability or leave you unprotected when disputes arise.
IR35 and your contract
IR35 — the off-payroll working rules — looks at the substance of your engagement to determine whether you are genuinely in business on your own account or whether you are in what HMRC calls a disguised employment relationship.
Your contract is not the only factor — the actual working practices matter too — but the contract terms are the starting point. A contract that reflects genuine self-employment strengthens your outside-IR35 position; a contract with employment-style terms undermines it.
Key contractual indicators that support an outside-IR35 position include a right of substitution — the right to send a qualified substitute to do the work — the absence of a mutuality of obligation requiring you to accept work or the client to offer it, and control provisions that give you autonomy over how you do the work rather than requiring you to follow the client's direction.
What to check in your contractor agreement
Substitution clause: does your contract include a genuine right to send a substitute? A nominal substitution right that requires client approval in all cases is weaker than an unconditional right. HMRC will look at whether the substitution right is genuine and has ever been exercised.
Mutuality of obligation: does the contract require you to work specified hours or accept assignments? Or does it reflect a project-based engagement where neither party is obliged to continue beyond the current statement of work?
Control: who decides how the work is done? Genuine contractor relationships give you control over method, even if the client specifies the outcome. Employment-style direction over working methods is a red flag for IR35.
Exclusivity: does the contract prevent you from working for other clients during the engagement? Exclusivity is inconsistent with being genuinely in business on your own account.
Payment terms
Check when invoices fall due and what the consequences of late payment are. Under the Late Payment of Commercial Debts Act, you are entitled to charge statutory interest on late payments, but your contract may specify different terms.
Check whether you are paid for all time worked or for deliverables. Project-based payment — where you are paid for the output rather than the time — is more consistent with an outside-IR35 position.
Intellectual property
Unless your contract specifies otherwise, IP you create as a contractor may belong to you. Most client contracts require assignment of IP created during the engagement. Check what you are assigning, whether you retain any licence to use work samples in your portfolio, and whether the assignment covers pre-existing IP you bring to the project.
Liability and indemnities
Check whether you are required to carry professional indemnity insurance and to what level. Check whether the indemnities you are giving the client are proportionate to the value of the contract.
Getting your contractor agreement reviewed
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