Independent Contractor Agreement in the UK
Calling someone a contractor does not settle their status in the UK. Section 230(3)(b) of the Employment Rights Act 1996 creates an intermediate worker category, and in Uber BV v Aslam the Supreme Court held that the written contract is not even the starting point. Tax status is a separate question, and under the off-payroll working rules the client normally makes the determination.
Governing law
Employment status is governed by section 230 of the Employment Rights Act 1996 as interpreted by the Supreme Court. Tax status for engagements through an intermediary is governed by the off-payroll working rules administered by HMRC.
What a independent contractor agreement has to contain in the UK
A worker is an individual who has entered into or works under a contract of employment, or any other contract whereby the individual undertakes to do or perform personally any work or services for another party whose status is not, by virtue of the contract, that of a client or customer of any profession or business undertaking carried on by the individual.
The Supreme Court held that it would be inconsistent with the purpose of the legislation to treat the terms of a written contract as the starting point in determining whether an individual falls within the definition of a worker, and looked instead at the substance of the relationship, including control over price, performance standards and communications.
Under the off-payroll working rules, for public sector clients and medium or large private sector clients the client determines the worker's employment status for tax and must give the contractor a Status Determination Statement with reasons. Where the client is a small organisation outside the public sector, the worker's intermediary decides.
If the individual is in fact a worker rather than genuinely self-employed, statutory paid annual leave applies: four weeks under regulation 13 plus additional leave under regulation 13A, an aggregate subject to a maximum of 28 days.
Form, notarisation and registration
There is no requirement for the engagement to be in writing. The worker definition covers a contract that is express or implied and, if express, oral or in writing, so an undocumented arrangement is assessed on the same test.
What catches drafters out
Relying on a substitution or independence clause that never operates in practice. After Uber BV v Aslam the written terms are not the starting point, and a tribunal looks at how the relationship actually runs.
Omitting the Status Determination Statement. HMRC guidance states that where the off-payroll rules apply the client must provide the contractor with a statement setting out the decision and the reason behind it, so a contract that is silent on status leaves a compliance step undone.
Independent Contractor Agreement in the UK: common questions
- Does calling someone self-employed make them self-employed under UK law?
- No. Section 230(3)(b) of the Employment Rights Act 1996 defines a worker by whether the individual undertakes to perform work personally for a party who is not a client or customer of a profession or business undertaking carried on by the individual. In Uber BV v Aslam [2021] UKSC 5 the Supreme Court held that it would be inconsistent with the purpose of the legislation to treat the terms of a written contract as the starting point, and examined the reality of the relationship instead.
- Who decides IR35 status for a UK contractor?
- HMRC guidance states that in most cases the client determines the worker's employment status for tax and must give the contractor a Status Determination Statement setting out the decision and the reason behind it. The exception is where services are provided to a small client outside the public sector, in which case the worker's intermediary is responsible for deciding whether the rules apply. HMRC's Check Employment Status for Tax tool supports the determination.
- Do UK contractors get paid holiday?
- Only if they are workers or employees rather than genuinely in business on their own account. Where the individual falls within the worker definition in section 230(3)(b) of the Employment Rights Act 1996, regulations 13 and 13A of the Working Time Regulations 1998 give four weeks plus additional annual leave, an aggregate entitlement subject to a maximum of 28 days.
Sources
Every statement on this page is drawn from one of these. All were fetched on .
The same document elsewhere
Other UK documents
Independent Contractor Agreement: the jurisdiction-neutral guideBack to Document Library