Outside IR35 Contract Template | Free UK IR35 Agreement
Operating outside IR35 without a properly drafted contract leaves contractors exposed to costly HMRC investigations and potential reclassification as deemed employees. For contractors working through a Personal Service Company, a robust outside IR35 contract must demonstrate genuine business-to-business relationships under Chapter 10 of the Income Tax (Earnings and Pensions) Act 2003. Key clauses around substitution rights, mutuality of obligation, and control are scrutinised directly by HMRC when determining employment status. Without clear contractual language reflecting the reality of your engagement, even legitimate outside IR35 arrangements can unravel under investigation. A well-structured agreement protects both the contractor and the end client by evidencing genuine self-employment from day one. Generate your compliant outside IR35 contract now and start your next engagement with confidence.
Generate your IR35 Agreement free →Key clauses in a IR35 Agreement
Right of Substitution
This clause grants the contractor the genuine right to send a qualified substitute to perform the services, which is a critical indicator of self-employment status under Chapter 10 ITEPA 2003. HMRC and tribunals, including the Supreme Court in Autoclenz Ltd v Belcher [2011], have consistently treated unfettered substitution rights as strong evidence against deemed employment.
Mutuality of Obligation
This clause expressly states that the client is under no obligation to offer work and the contractor is under no obligation to accept it, dismantling one of the three key employment status tests established in Ready Mixed Concrete v MPNI [1968]. Clearly excluding mutuality of obligation in the written contract helps demonstrate that the relationship is genuinely project-based rather than an ongoing employment arrangement.
Control and Direction
This clause defines that the contractor retains control over how, when, and where the services are delivered, which directly counters the control test used by HMRC under their Check Employment Status for Tax (CEST) tool. Specifying that the client may set outcomes and deliverables but not dictate working methods is essential to evidencing an outside IR35 position under ITEPA 2003 rules.
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Generate free →Frequently asked questions
Does an outside IR35 contract guarantee I won't be investigated by HMRC?
No contract can guarantee immunity from an HMRC investigation, but a well-drafted outside IR35 contract significantly strengthens your position by providing written evidence of genuine self-employment. HMRC looks beyond the contract itself to the actual working practices under IR35 rules in Chapter 10 ITEPA 2003, so the contract must reflect the day-to-day reality of the engagement. Using HMRC's CEST tool alongside your contract to document your status is strongly recommended.
Who is responsible for IR35 determination in the private sector?
Since the Off-Payroll Working reforms took effect in April 2021, the responsibility for IR35 status determination in medium and large private sector organisations sits with the end client, not the contractor. The end client must issue a Status Determination Statement (SDS) under the off-payroll working rules in Chapter 10 ITEPA 2003, and the fee-payer in the supply chain is liable for any unpaid tax if the determination is wrong. Small companies as defined by the Companies Act 2006 are exempt, meaning the contractor's PSC retains responsibility for its own determination.
Can I use the same outside IR35 contract for multiple clients?
You can use a standard outside IR35 contract template as a starting point, but each contract should be tailored to reflect the specific working arrangements of each individual engagement. HMRC assesses IR35 status on a contract-by-contract basis, so generic contracts that do not accurately describe the actual relationship with a specific client carry greater risk. Ensuring the substitution, control, and mutuality clauses accurately mirror real working practices for each client is essential to maintaining a defensible outside IR35 position.
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.