Clear service details hold the consultant accountable and provide evidence if disputes arise later.
Payment and billing details
Payment terms hold clients accountable for paying the correct amount at the right time. These terms can include:
- Fees: Flat fee or hourly rates
- Applicable taxes: For example, VAT
- Retainer: Whether the client will pay a retainer before work begins
- Invoice schedule: When services are complete, every two weeks, weekly, monthly, or at set stages
- Payment terms: When payment is due (for example, within 30 days or upon receipt)
- Interest on late payments: Whether interest applies, and at what rate
Any late charges must be reasonable. Contractual interest rates of up to 25% per year on unpaid sums may be enforceable, but legislation and case law prohibit extortionate rates even where both parties agree to them.
Statutory rules on late commercial payments are set out in the Late Payment of Commercial Debts Regulations 2018.
Expenses and reimbursement
The agreement should state whether the client will reimburse the consultant for reasonable, work-related expenses. If the client will reimburse the consultant, it's worth setting out:
- Pre-approval: Whether expenses need to be approved by the client before they're incurred
- Guidelines: Any limits or categories (for example, travel, materials, or software)
Clear expense terms prevent disagreements about what's claimable later on.
Term and termination
The term of a Consultancy Agreement can be defined in different ways:
- A single project: Until the work is complete
- A fixed period: With set start and end dates
- An indefinite period: For ongoing services
How termination works depends on the term. For ongoing agreements, a termination clause is essential — it sets the notice period either party must give to end the contract. For single-project or fixed-term agreements, the parties can choose whether to allow early termination and, if so, how much notice is required.
Notice periods let a party exit the agreement without breaching it. They also give the other party time to resolve any issues that prompted the termination. If a contract doesn't provide adequately for termination, a Contract Termination Agreement can be used instead.
Confidentiality
Consultants often need access to a client's confidential details to do their work. For example, an accountant advising a new business will need to see the client's business plan to give useful guidance.
A confidentiality clause sets terms for handling private information, including trade secrets and other intellectual property. It gives clients peace of mind that sensitive details stay secure. Confidentiality can apply:
- Indefinitely: The consultant is bound to secrecy with no end date
- Until the end of the agreement: The duty ends when the contract does
For extended or standalone protection, a separate Confidentiality Agreement can supplement the clause.
Intellectual property ownership
A Consultancy Agreement can determine who owns the rights to any intellectual property (IP) created during the contract. This includes plans, creative works, and materials the consultant develops for the client.
The contract can set out either:
- Client ownership: The client receives complete ownership of all materials produced
- Consultant ownership: The consultant retains all ownership of the materials generated
Whichever party doesn't hold the rights will only have limited use of and access to those materials in the future. Further guidance on IP registration and rights is available from the UK's Intellectual Property Office.
Additional clauses: non-compete, non-solicitation, and insurance
Depending on the work, a Consultancy Agreement may include extra clauses such as:
- Non-compete: Restricts the consultant from working with the client's competitors for a set period
- Non-solicitation: Prohibits the consultant from approaching the client's staff or customers
- Insurance requirements: Requires the consultant to hold professional indemnity or public liability cover
Restrictive covenants must be reasonable in scope, geography, and duration to be enforceable. LawDepot's template also lets you add other custom clauses that apply to your arrangement. For a standalone restriction, see our Non-Compete Agreement.
What is IR35 and how does it affect consultants?
IR35 (also called the off-payroll working rules) is UK tax legislation that determines whether a consultant working through their own limited company should be treated as an employee for tax purposes.
If IR35 applies, income tax and National Insurance are paid at employee rates rather than at self-employed rates.
IR35 typically applies when:
- The consultant provides services through an employment intermediary (usually their own limited company)
- The working relationship, if looked at directly, would resemble employment
- The client is a medium or large private-sector business, or any public-sector body
Since April 2021, medium and large private-sector clients are responsible for deciding whether IR35 applies to each engagement. Small clients remain outside these responsibilities, and the consultant's company makes the determination instead.
A well-drafted Consultancy Agreement can support an outside-IR35 position by clearly documenting the consultant's autonomy, right of substitution, and lack of exclusivity — but the actual working practices must match the contract.
Data protection and consultant obligations
Consultants who handle personal data on behalf of a client must comply with UK data protection law.
The main rules and rights are set out in UK General Data Protection Regulations (GDPR), while the Data Protection Act 2018 provides the framework for enforcing those rules and protecting those rights. Both Acts were updated by the Data (Use and Access) Act 2025.
Where a consultant processes personal data as part of their services, the agreement should address:
- Roles: Whether the consultant is a data processor or joint controller
- Security: How personal data will be stored, transferred, and destroyed
- Breach notification: How and when to report a data breach to the client
For consultants working with employee data, records, or customer information, it is worth noting that the contractual obligations of the confidentiality clause apply in tandem with the statutory data protection regime to the same data.
The difference is that the obligations of confidentiality are owed to the client, while the data protection obligations are owed to the individuals whose data is being controlled or processed.
How to draft a Consultancy Agreement
Drafting a Consultancy Agreement doesn't need to be complicated. Here's a straightforward approach using LawDepot's template questionnaire:
- Set the term: Decide whether services will run until completion, until a specified end date, or on an ongoing basis.
- Identify the parties: Include full names and addresses for both the consultant and the client, whether individuals or companies/partnerships.
- Define the services: Describe the work, deliverables, and any deadlines.
- Set payment and billing terms: Agree on fees, applicable taxes, retainer, invoicing schedule, payment due dates, and interest on late payments.
- Set termination rules: Decide whether either party can terminate the contract and, if so, how much notice is required.
- Address expenses: Confirm whether the client will reimburse work-related expenses and whether pre-approval is needed.
- Assign intellectual property ownership: Decide whether the client or the consultant will own materials created under the contract.
- Address confidentiality: Set whether the consultant's duty of confidentiality applies indefinitely or until the end of the agreement.
- Add any extra clauses: Include non-compete, non-solicitation, or insurance requirements if relevant.
LawDepot's template walks you through each of these steps and produces a contract customised for either England, Wales, Scotland, or Northern Ireland.
Consultancy Agreement FAQs
