How to review a consultancy agreement under English law

A consultancy agreement engages an individual or their personal service company to provide services to a client. Under English law the commercial terms matter, but so does the tax and employment status that the arrangement creates. This checklist covers what to check and how to review the agreement in Word with LexDraft's Services playbook.

Last checked: 17 October 2026. The law changes; check the current position before relying on this page.

Status and IR35

• Employment status. The label in the contract does not decide status. Courts and tribunals look at the reality: personal service, control, mutuality of obligation and integration. Someone can be a "worker" with some employment rights even if they are not an employee (Uber BV v Aslam [2021]).
• The off-payroll working rules. Where the consultant works through their own company, the IR35 rules ask whether they would be an employee if engaged directly. If the client is in the public sector, or is a medium or large private sector organisation, the client must decide status and give a status determination statement with reasons (Chapter 10 of Part 2 of ITEPA 2003). If the client is small, the consultant's own company decides (Chapter 8).
• Small company test. A company is small if it meets two of three conditions on turnover, balance sheet and employees. HMRC has said the higher Companies Act thresholds (turnover of £15 million, balance sheet of £7.5 million, 50 employees) apply for the off-payroll rules from 6 April 2026. Check the client's size against its own financial years.
• Disagreements. The consultant can challenge a status determination, and the client must respond within 45 days.
• Drafting points. A genuine right of substitution, the consultant's control over how the work is done, and no obligation to offer or accept further work all support an outside-IR35 position, but only if they reflect what happens in practice. Tax indemnities from the consultant are common; check whether they would be worth anything.

Clause checklist

• Services and deliverables. Describe the services, milestones and acceptance. Avoid line-management language.
• Fees and expenses. Day rate or fixed fee, invoicing, VAT and payment terms. The Late Payment of Commercial Debts (Interest) Act 1998 implies statutory interest unless the contract provides a substantial remedy.
• Intellectual property. Copyright in work made by a consultant belongs to the consultant unless it is assigned. An assignment of copyright must be in writing and signed by the assignor (section 90(3) of the Copyright, Designs and Patents Act 1988). Ask for a present assignment of future rights, a moral rights waiver and a licence of any background IP.
• Confidentiality. Include the client's confidential information and third-party information, with a sensible survival period.
• Data protection. If the consultant processes personal data for the client, include Article 28 UK GDPR terms. See our UK GDPR DPA guide.
• Liability and insurance. Cap, exclusions, and professional indemnity insurance. Business-to-business exclusions on standard terms must be reasonable under the Unfair Contract Terms Act 1977.
• Restrictive covenants. Non-solicitation of staff and clients is more defensible than a non-compete for a consultant; any restriction must be reasonable.
• Compliance. Anti-bribery wording under the Bribery Act 2010, and anti-fraud wording now that the failure to prevent fraud offence applies to large organisations.
• Termination. Notice periods, termination for breach, return of property and handover.

Review the consultancy agreement in Word with LexDraft

1. Open the consultancy agreement in Word, open LexDraft from the Home tab and set the jurisdiction chip to UK: England & Wales (or UK: Scotland or UK: Northern Ireland if that is the governing law).
2. Run the quick checks. They are rule-based and run without AI, catching undefined or unused defined terms, broken cross-references, numbering gaps and inconsistent capitalisation.
3. Run the review with the Services playbook, which checks scope, acceptance, fees, IP, liability and termination terms. Findings are graded Critical, High, Medium or Low, and LexDraft flags standard terms that are missing.
4. Accept or reject each proposed redline. Accepted edits land as native Word tracked changes, ready for the other side.
5. Ask the Assistant to explain a clause in plain English or suggest wording for your side. Answers use UK spelling.
6. Look up any case you want to rely on in the Case law tab, then open the judgment on Find Case Law and read it yourself. UK judgments in LexDraft come from The National Archives' Find Case Law service, which only partially represents the activities of the courts and tribunals. Not every judgment or decision is included. Find Case Law does not include judgments from Scottish or Northern Irish courts or tribunals.

LexDraft does not give legal advice and does not summarise judgments. AI output can be wrong, so qualified counsel must check every redline before it goes out.

Common mistakes

• Using an employment contract template and renaming it a consultancy agreement.
• A substitution clause the client would never allow in practice.
• No written assignment of IP, so the consultant still owns the deliverables.
• Using "Consultant", "Contractor" and "Supplier" for the same party. The defined-term check catches this.

This guide is general information, not legal advice. LexDraft does not give legal advice; qualified counsel must review every draft. LexDraft is not affiliated with or endorsed by The National Archives or any court. Spotted something out of date? Email support@lexdraft.ai and we will fix it.