Fractional Director Contract UK | Part-Time Director Agreement
Bringing a senior leader into your business on a part-time basis creates immediate legal uncertainty: is this person an employee, a worker, or a genuine independent contractor? Without a robust fractional director contract, you risk costly IR35 misclassification under Chapter 10 of the Income Tax (Earnings and Pensions) Act 2003, disputed fee arrangements, and blurred boundaries around fiduciary duties under the Companies Act 2006. A well-drafted fractional director agreement clarifies the director's scope of authority, time commitment, fee structure, and intellectual property ownership from day one, protecting both parties if the relationship is ever scrutinised by HMRC. It also ensures late payment remedies are enforceable under the Late Payment of Commercial Debts Act 1998. Generate a professionally drafted fractional director contract tailored to UK law in minutes.
Generate your Consulting Agreement free →Key clauses in a Consulting Agreement
Scope of Directorial Authority
This clause precisely defines the decisions and actions the fractional director is authorised to take on behalf of the company, preventing unauthorised binding of the business under agency principles established in common law. Without this boundary-setting, the company risks third-party liability for acts the director takes outside their agreed remit, particularly given the broad fiduciary duties imposed on directors by the Companies Act 2006.
IR35 and Tax Status
This clause sets out the basis on which the fractional director operates as an independent contractor and assigns responsibility for tax compliance, reducing exposure to IR35 liability under Chapter 10 of the Income Tax (Earnings and Pensions) Act 2003. It should include a substitution right and confirm that the director uses their own limited company or personal service vehicle, both factors HMRC weighs heavily when determining employment status.
Fees, Invoicing, and Late Payment
This clause establishes the agreed day rate or monthly retainer, invoice schedule, and payment terms, giving both parties a clear contractual basis for enforcement. Under the Late Payment of Commercial Debts Act 1998, unpaid invoices between businesses automatically attract statutory interest at 8% above the Bank of England base rate once a payment deadline is missed, making precise payment terms essential.
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Generate free →Frequently asked questions
Does a fractional director fall inside IR35?
IR35 status for a fractional director depends on the actual working arrangements rather than the job title. HMRC applies its standard employment status tests under Chapter 10 of ITEPA 2003, examining factors such as personal service, control, and mutuality of obligation. A fractional director who operates through a limited company, sets their own hours, works for multiple clients simultaneously, and has a genuine right of substitution is far more likely to sit outside IR35.
Can a fractional director be a registered Companies House director at the same time?
Yes, a fractional director can be formally appointed as a statutory director at Companies House under the Companies Act 2006 while still operating on a consultancy basis. However, formal appointment triggers full statutory directorial duties including the duty to act in the company's best interests under section 172 of the Companies Act 2006, so the contract should explicitly address the scope of those duties and any limitations on authority. Many fractional engagements deliberately avoid formal Companies House appointment to keep the relationship clearly consultancy-based.
What notice period should a fractional director contract include?
Because a fractional director is engaged as an independent contractor rather than an employee, the statutory minimum notice periods under the Employment Rights Act 1996 do not apply, giving both parties freedom to agree any notice period commercially. A notice period of one to three months is common in the market, reflecting the time needed to transition strategic responsibilities without disrupting the business. The contract should also specify whether the client can place the director on gardening leave during the notice period and how fees are handled in that scenario.
The information on this page is for general informational purposes only and does not constitute legal advice. Contracto generates AI-assisted contract templates — they are not a substitute for advice from a qualified solicitor. For high-value or complex engagements, always seek independent legal review.