Before you sign
A consultancy agreement usually sets out the services and deliverables, the fee basis (day rate, fixed fee or retainer), invoicing and payment, who owns the work, confidentiality, liability, insurance, termination and sometimes restrictions after the engagement ends.
Consultants tend to get caught by a vague scope that keeps growing while the fee stays the same, long payment terms, an IP clause that hands over their own tools and methods along with the deliverables, and post-engagement restrictions. Clients tend to get caught by deliverables too loose to hold anyone to, missing confidentiality or IP terms, and an arrangement that looks like employment for tax purposes.
QuickLegalCheck reads the whole agreement from your side, consultant or client, rates every clause, flags what is missing and suggests wording you can send back. The full report is £49 + VAT.
Why it’s worth checking
Consultancy agreements often run to a few pages and look routine, which is why they get signed quickly. The clauses that matter are the ones that decide what happens when the engagement does not go to plan.
Scope is the most common source of trouble. Imagine a consultant engaged for three months to review a company’s operations, under a scope that reads “support with all matters relating to organisational structure”. When implementation runs on for another three months, the client says it is within scope and the consultant says it is new work. Neither can point to anything in the agreement that settles it. A defined list of deliverables and a simple change procedure would have.
Intellectual property is the next. Say a developer builds a bespoke tool for a client under an agreement that assigns “all intellectual property created in connection with the services” to the client. Read literally, that can catch the developer’s own libraries and methods that went into the tool, not just the finished product. The usual fix is for the client to own the deliverables made specifically for it, while the consultant keeps its pre-existing materials and general know-how and gives the client a licence to use whatever is built into the deliverables.
For clients, the risks run the other way. If there is no written assignment, you may not own work you have paid for. If there is no confidentiality clause, you are relying on the general law of confidence, which is harder to enforce. If the agreement has no liability clause at all, the consultant’s liability for breach is not capped, but you still have to prove the loss and show it was caused by the breach.
Then there is tax. If the consultant works through their own limited company and the relationship looks like employment in substance, the off-payroll working rules (IR35) can apply. Where the client is in the public sector or is a medium or large business, it is the client that must decide the consultant’s status and, if the rules apply, tax and National Insurance are deducted from the fees. Where the client is small, that decision sits with the consultant’s own company. Either way, the agreement is evidence, but HM Revenue & Customs (HMRC) will look at what actually happens day to day.
Key terms to look for
Scope of services
What the consultant will actually do and deliver, by when, and how changes to the scope are agreed and priced.
Fees and payment terms
Rate or fixed fee, expenses, when invoices go out and when they must be paid. Statutory late payment interest usually applies between businesses unless the contract gives a substantial alternative remedy.
IR35 and employment status
Whether the engagement looks like employment for tax purposes. The written terms matter, but HMRC and tribunals look at how the work is actually done.
Intellectual property
Who owns what the consultant creates. Without a written assignment, the consultant usually keeps the copyright and the client may only have a licence to use it.
Confidentiality
Protects information shared during the engagement, with sensible exceptions for information that is public or already known.
Restrictive covenants
Limits on working for the client’s competitors or approaching its clients or staff afterwards. They need to be reasonable to be enforceable.
Termination and notice
How either side can end the agreement, the notice required and what is paid for work done up to that point.
Liability and indemnity
Who bears the loss if something goes wrong, any cap on liability and any indemnities that sit outside the cap.
Insurance requirements
Clients often require professional indemnity insurance. Check the level of cover asked for and how long it must be kept after the work ends.
Common mistakes
A vague or open-ended scope of services
Each side ends up with a different idea of what was agreed. The consultant does extra work for no extra fee, or the client feels short-changed, and there is nothing in the agreement to settle it. Clear deliverables, milestones and a change procedure help both sides.
Unclear payment terms
Without clear invoicing points and payment deadlines, consultants can wait months to be paid. Between businesses, statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 is usually available anyway, but spelling out payment dates, and a right to suspend work if invoices are unpaid, gives the consultant far more practical leverage.
Assigning all IP to the client without carving out existing materials
A blanket assignment can sweep in the consultant’s own methods, templates and code. A fairer split is for the client to own the bespoke deliverables and for the consultant to keep its background materials, licensing them to the client so far as they are built into the work.
Wide or long non-compete and non-solicitation clauses
A restriction stopping a consultant working anywhere in the client’s sector for a long period is unlikely to be reasonable and may not be enforceable. Restrictions tied to named competitors, or to clients the consultant actually dealt with, for a short period are much easier to justify.
Missing or thin confidentiality terms
If the agreement does not say what counts as confidential, what the consultant can do with it and what happens to it at the end, the client has to fall back on the general law of confidence, which is less certain. Consultants also need the usual exceptions so they are not bound by information that is already public.
Best practice
If you are the consultant, pin the scope down to deliverables and milestones and make sure there is a way to agree and charge for extra work. Check the payment terms and ask for a right to suspend work if you are not paid. Keep your pre-existing materials and know-how out of any IP assignment. Push back on any restriction that would stop you working in your field, and check that any insurance requirement is realistic for the work. If you work through a limited company, look at how the engagement will actually run, not only the wording, and take tax advice if you are unsure where you stand on IR35.
If you are the client, set out the deliverables, timetable and acceptance process so you can tell whether the work has been done. Make sure you take an assignment of the bespoke work you are paying for, with a licence to use anything the consultant brings with them. Include confidentiality, data protection terms if personal data is involved, termination rights and a sensible liability position. If you are a medium or large business engaging someone through their own company, you will need to carry out a status determination under the off-payroll working rules, and avoid terms that look like employment, such as line management or control over how the work is done, unless that reflects reality.
Questions
What is IR35 and how does it affect consultancy agreements?+
IR35, also called the off-payroll working rules, applies where a consultant works through an intermediary, usually their own limited company, and would be an employee if engaged directly. If the rules apply, the income is taxed broadly as employment income. For public sector clients and medium or large private sector clients, the client decides the status and the fee-payer deducts tax and National Insurance. For small clients, the consultant’s company decides and accounts for the tax. The agreement should reflect a genuine business-to-business relationship, but it will not help if the day-to-day reality looks like employment. HMRC’s guidance on gov.uk explains the rules and the small company exemption.
Can a consultant reuse work created for one client with other clients?+
It depends on the IP clause. If the agreement assigns everything the consultant creates to the client, reusing it without permission could infringe the client’s rights. If there is no assignment, the consultant will usually keep the copyright, subject to whatever licence the client has. A common middle ground is for the client to own the bespoke deliverables while the consultant keeps its background tools and methods and can use them elsewhere. General skill and experience are not something a client can own.
What should a scope of services clause include?+
Specific deliverables and the form they will take, a timetable, key milestones, the time or resource the consultant will commit, how the client will accept the work, and a procedure for agreeing and pricing changes. Avoid catch-all wording such as “all services relating to” unless you really intend the engagement to be open-ended.
What happens if a consultant does not complete the work?+
That depends on the agreement. Where the scope is clear, a failure to deliver is a breach, and the client may be able to withhold payment for the undelivered work, claim damages (for example, the extra cost of getting someone else to finish it) or terminate, depending on the terms and how serious the failure is. Where the deliverables are vague, it is much harder to show there has been a breach at all.