NHS IR35 Contractor Agreement Template UK
Working as an NHS contractor through a Personal Service Company creates significant IR35 exposure, particularly since the 2021 off-payroll working reforms shifted liability to public sector engagers under Chapter 10 of the Income Tax (Earnings and Pensions) Act 2003. Without a properly structured contractor agreement, HMRC can reclassify your engagement as disguised employment, triggering unexpected tax and National Insurance bills that can run into tens of thousands of pounds. An NHS IR35 contractor agreement establishes clear boundaries around substitution rights, control, and mutuality of obligation — the three pillars HMRC scrutinises most closely during investigations. It also protects both the contractor and the NHS trust should a Status Determination Statement be challenged. Getting the contractual language right from day one is essential. Generate your compliant NHS IR35 contractor agreement now.
Generate your IR35 Agreement free →Key clauses in a IR35 Agreement
Right of Substitution
This clause establishes that the contractor retains the genuine right to send a qualified substitute to perform the services, a critical indicator of self-employment under HMRC's IR35 tests. Without an enforceable substitution right, HMRC is more likely to determine that the engagement falls inside IR35 under Chapter 10 ITEPA 2003, exposing the NHS trust as the fee-payer to significant tax liabilities.
Status Determination Statement Acknowledgement
Under the off-payroll working rules introduced via the Finance Act 2020, NHS trusts as public sector bodies are legally required to issue a Status Determination Statement (SDS) before the engagement begins. This clause records receipt and acceptance of the SDS, documents the IR35 determination made by the engager, and establishes a clear audit trail should HMRC later investigate the contractor's tax position.
Mutuality of Obligation Exclusion
This clause explicitly states that the NHS trust has no obligation to offer work and the contractor has no obligation to accept it, directly negating the mutuality of obligation test that HMRC applies when assessing employment status under case law including Carmichael v National Power plc. Clearly excluding mutuality of obligation strengthens the outside-IR35 position and reduces the risk of the engagement being reclassified as a contract of service.
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Generate free →Frequently asked questions
Who is responsible for making the IR35 determination on an NHS contract?
Since April 2017, public sector bodies including NHS trusts are responsible for determining the IR35 status of contractors they engage, under Chapter 10 of the Income Tax (Earnings and Pensions) Act 2003. The NHS trust must issue a Status Determination Statement before the engagement starts, and if challenged, the trust bears the cost of any unpaid tax if it fails to take reasonable care in making the determination. Contractors can dispute an SDS through the client-led disagreement process within 45 days.
Can I still work through my PSC on an NHS contract if I am inside IR35?
Yes, you can still operate through your Personal Service Company even if the NHS trust determines your engagement falls inside IR35 under Chapter 10 ITEPA 2003. However, the fee-payer in the chain — usually a recruitment agency — must deduct income tax and employee National Insurance contributions from your fees before payment, effectively treating you as a deemed employee for tax purposes. You will not receive the same employment rights as a permanent employee despite this tax treatment.
What happens if I disagree with the NHS trust's IR35 Status Determination Statement?
Under the off-payroll working rules in Chapter 10 ITEPA 2003, contractors have the right to formally dispute an SDS through the client-led disagreement process, and the NHS trust must respond within 45 days with either a new determination or written reasons for maintaining the original decision. If the trust fails to respond within the 45-day window, liability for unpaid tax transfers from the fee-payer back to the NHS trust itself. Contractors can also use HMRC's Check Employment Status for Tax tool as supporting evidence, though its output is not legally binding.
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.