Free IR35 contract template downloads for contractors

To successfully avoid IR35, both the terms of a contract for services, and the working practices of the individual providing these services must demonstrate that the worker is in business on their own account, and not merely a disguised employee. Here, we discuss the importance of contract wording and provide links to example IR35 contract templates for you to download.

Since 2000, when IR35 was first implemented, a burgeoning ‘IR35 industry’ has built up, with a multitude of limited company accountants and employment status experts happy to provide IR35 contract reviews and advice.

IR35 contracts under the off-payroll rules

Since April 2021, medium and large private sector clients have been responsible for determining a contractor’s IR35 status.

This means that while contract wording remains important, it is no longer the sole deciding factor. The client must issue a Status Determination Statement (SDS), and will consider both the written contract and the actual working practices.

As a result, contractors should view contract terms as one part of a wider IR35 position, rather than a guarantee of being outside IR35.

What is a so-called ‘IR35 friendly’ contract?

There is no such thing as a guaranteed ‘IR35-proof’ contract.

Of course, a so-called ‘IR35 friendly’ contract refers to a contract to provide services which demonstrates that a worker is not caught by IR35.

Whilst many agencies promote their contracts as ‘IR35 friendly’, each engagement should be reviewed individually, including the working practices, and the term should not be relied upon.

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Quick IR35 contract red flags

• Named individual only (no substitution allowed)
• Fixed working hours dictated by the client
• Line management structure or appraisals
• Open-ended or rolling contract with no clear deliverables
• Payment by time worked with no defined project scope

Important points related to IR35 contracts

• The contract between the contractor and agency (or end client if working directly) should demonstrate self-employment.
• The lower-tier contract (contractor-agency) should mirror the terms of the upper-tier contract (agency-client).
• The contractor’s working practices should mirror the terms of the contracts. They should show that they work in a manner more akin to a self-employed individual than to a permanent staff member, which could indicate that they are a ‘disguised employee’ (as per the HMRC term).
• We would recommend using a specialist IR35 contract review provider before starting a new contract. They will be able to negotiate contract clause changes with recruitment agencies, as well as provide an opinion as to your risk of an IR35 investigation.

Key clauses within written contracts

Although there are numerous factors that determine whether a worker is caught by IR35, three key employment tests provide the strongest indicators of a worker’s true IR35 status.

1. Substitution

The right of substitution is considered important to contractors wanting to legitimately work outside IR35.

To strengthen an outside IR35 position, you need to be able to show that your client doesn’t need you to personally provide the services agreed upon in the contract, and that any individual with the right skills, qualifications and experience can carry out these services if you are unable to do so yourself.

The key point is that the client is buying a service, not a specific individual.

Substitution tips:

• Exercising your right of substitution is a way to demonstrate that it is genuine, but you should only exercise it out of a genuine need.
• Having a substitute ‘ready to go’ can help demonstrate legitimacy, but the contractual right is most important.
• Make sure there are no lengthy handover periods, as this could undermine the practical ability to substitute.
• To be a genuine substitution, the services must remain the responsibility of your company and the substitute must be paid by your company.

2. Control

While it is acceptable for a contractor operating outside IR35 to agree to deliver a particular task at a specific time and from a client’s office, you should be able to execute the work as you see fit.

The client should not control how the work is carried out.

In other words, your client should not have direct control over the way in which you provide your services. Failure to ensure this could result in you being viewed as an employee.

Control tips:

• Make sure your contract doesn’t unnecessarily specify where you provide your services from.
• Your client shouldn’t dictate your working hours.
• Avoid appraisals, line management structures, or employee-style reporting.
• How you provide your services (your process and methodology) should be up to you.
• Control may be less relevant where the work is highly specialist and the client cannot direct how it is done.

3. Mutuality of Obligation

Mutuality of Obligation (MoO) refers to an employer’s obligation to provide work and the worker’s obligation to accept it.

For an outside IR35 position, there should be no ongoing obligation to offer or accept work beyond the contract.

MoO tips:

• Ensure there are clear start and end dates for the contract.
• Avoid open-ended or rolling arrangements where possible.
• Only accept work that falls within the agreed contract scope.
• Out-of-scope work should require a new agreement and payment terms.
• Include a termination clause allowing both parties to disengage.

Further considerations

In addition to these three key status tests, outside IR35 status can be strengthened in the following ways:

• You are not ‘part and parcel’ of the client organisation, meaning you use your own equipment and do not enjoy staff benefits or privileges.
• You work on multiple projects simultaneously and have multiple sources of income.
• You shoulder ‘financial risk’, and are liable to correct mistakes in your own time and at your own expense.
• You operate as a genuine business, have operating costs, perhaps even a company website and are covered by business insurance.

In practice, many clients now impose standardised contracts and working arrangements, which can limit a contractor’s ability to negotiate terms. This makes it even more important to understand the risks before accepting an engagement.

Free IR35 contract template downloads

Qdos Contractor has several free templates which may be useful to contractors, including model contracts for contractor to agency, and for contractor to client (if working direct).

You can access both of these templates, plus examples of key clauses here.

Contracting directly with your end-client

If you are contracting directly with your client, it is important to have a written contract in place.

While verbal agreements may still constitute a contract, it is much more difficult to demonstrate your employment status in the event of an HMRC enquiry without written terms.

Contracting via a recruitment agency

Most contractors work via recruitment agencies. In almost all cases, your agency will provide a draft contract before starting a new role.

This template should give you an indication of what is typically included and may highlight areas for improvement. It is worth noting that the ‘upper level’ contract between the agency and the client may also impact your IR35 status.