Key terms for freelancer contracts

This is a really important area to get right, because a well-drafted consultancy or freelance agreement protects both parties and reduces the risk of disputes, tax complications, and unexpected liabilities. Here is a structured guide to what you should include.

Parties and status:

Clearly identify both parties by full legal name and address. Include an express statement that the freelancer is engaged as an independent contractor and not as an employee or worker. This does not on its own determine status (HMRC and tribunals will look at the reality of the relationship), but it sets the intended framework and is a useful starting point.

Scope of services:

Define the services to be provided as precisely as possible. Vague descriptions lead to scope creep and disputes. You can attach a detailed schedule or statement of work. If the engagement is project-based, describe the deliverables. If it is ongoing, describe the nature and extent of the work.

Duration and termination:

State whether the contract is for a fixed term, tied to a specific project, or rolling. Include clear termination provisions, for example how much notice either party must give, and whether there is a right to terminate immediately for cause. Define what constitutes cause, such as material breach, insolvency, or serious misconduct.

Fees and payment:

Set out the fee structure clearly, whether it is a fixed project fee, a day rate, an hourly rate, or a retainer. Specify when invoices should be submitted, what payment terms apply (for example 14 or 30 days from invoice), and whether VAT applies. If the freelancer is VAT registered, they should charge VAT on their invoices. Address who bears expenses and whether prior approval is needed.

Tax and IR35:

The freelancer should be responsible for their own tax, National Insurance, and VAT. Include a clause confirming this. If you are a medium or large private sector organisation, or a public sector body, you have obligations under the off-payroll working rules (IR35) to assess the freelancer's employment status for tax purposes before payment. This is a real compliance risk, so consider whether a status determination statement is needed and ensure the arrangement genuinely reflects self-employment in practice.

Intellectual property:

This is often overlooked and is one of the most common sources of dispute. Under the Copyright, Designs and Patents Act 1988, the default position is that the creator of a work owns the copyright, not the person who commissioned it. This is different from the position with employees, where the employer generally owns work created in the course of employment. You should therefore include an express assignment of all intellectual property created in the course of the engagement, or at minimum a broad licence. Make sure the assignment covers present and future IP and is in writing, as required by section 90(3) of the 1988 Act.

Confidentiality:

Include mutual or one-way confidentiality obligations as appropriate. Define what constitutes confidential information, the obligations on the receiving party, the permitted exceptions (for example disclosure required by law), and the duration of the obligation, which should normally survive termination of the contract.

Data protection:

If the freelancer will have access to personal data, you need to consider your obligations under the UK GDPR and the Data Protection Act 2018. If the freelancer is processing personal data on your behalf, you will likely need a data processing agreement or appropriate data processing clauses within the contract, covering matters such as the nature and purpose of processing, security measures, sub-processing, and breach notification.

Non-solicitation and restrictive covenants:

You may want to include clauses preventing the freelancer from soliciting your clients, customers, or staff during and for a period after the engagement. Be aware that restrictive covenants must be reasonable and go no further than necessary to protect a legitimate business interest. Overly broad restrictions are unenforceable.

Liability and indemnities:

Consider including a limitation of liability clause, capping each party's liability at a reasonable level, for example the total fees paid or payable under the contract. You may also want the freelancer to indemnify you against losses arising from their negligence, breach of contract, or infringement of third party rights. Consider whether the freelancer should hold professional indemnity insurance and, if so, at what level.

Substitution and control:

If you want the arrangement to support genuine self-employment status, consider including a right of substitution, meaning the freelancer can send a suitably qualified substitute to perform the work. Also avoid excessive control over how, when, and where the work is done, as these are factors that point towards employment.

Insurance:

Depending on the nature of the work, you may want the freelancer to hold professional indemnity insurance, public liability insurance, or both. Specify minimum coverage levels and require evidence of cover.

Dispute resolution:

Include a clause setting out how disputes will be handled. You might include a requirement to attempt negotiation or mediation before either party can issue proceedings. Specify the governing law (the law of England and Wales) and the jurisdiction of the courts.

Governing law and jurisdiction:

Expressly state that the contract is governed by the law of England and Wales and that the courts of England and Wales have exclusive jurisdiction. This is particularly important if the freelancer is based abroad or works remotely.

Entire agreement and variation:

Include a clause confirming that the contract represents the entire agreement between the parties and supersedes all prior discussions and agreements. State that any variation must be in writing and signed by both parties.

Practical tips:

1. Use a written contract every time, even for small engagements. Oral agreements are valid but almost impossible to enforce with any certainty.

2. Do not simply copy a template from the internet without adapting it to the specific engagement. Generic templates often miss key provisions or include inappropriate clauses.

3. Keep the language clear and avoid unnecessary jargon. Both parties should understand their obligations without needing to decode the document.

4. If the engagement involves significant sums, sensitive IP, or access to personal data, it is worth having the contract reviewed by a solicitor.

5. Review the contract periodically if the engagement is ongoing, to make sure it still reflects the reality of the arrangement, particularly from an IR35 perspective.

If you would like, I can go into more detail on any specific clause or issue, for example IP assignment drafting, IR35 considerations, or data processing provisions.