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consultancy agreement
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Consultancy agreement

Consultancy agreement

If you’re a one-man service company, then you could be caught by IR35 if HMRC deems the contract between you and the client as one of employment rather than self-employment. Having a consultancy agreement in place can provide evidence that IR35 should not apply.

One-man service companies

Clients will often only deal with freelancers who operate through limited companies. This is because it will be the freelancer’s limited company, not the client, who will be liable to any PAYE or NI (under IR35 legislation) if HMRC deems the contract between the client and the freelancer as essentially one of employment rather than self-employment.

To provide evidence to HMRC that the engagement is one of self-employment, you need a realistic Consultancy Agreement in place between your company and the client. The agreement should satisfy the key IR35 factors, such as the right to provide a substitute, that you do not work under the complete control of the client and that you do not expect to be provided with more work when the contract in question expires. Ensure that your working practices mirror the terms of the agreement.

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