Setting up your first contract: what to agree upfront
Contract Essentials
Before you sign, read your contract carefully. Understand IR35 status, payment terms, IP ownership, and termination conditions. Getting this wrong costs tens of thousands.
Why your contract matters most
Contract is your most important legal document. It defines: IR35 status (inside or outside), payment terms (when you get paid), IP ownership (who owns your work), termination conditions (how much notice), liability limits (what happens if something goes wrong), and restrictive covenants (what you can't do after).
Most contractors sign day one without reading. This is the biggest mistake you can make. A bad contract can cost £10,000+ in tax exposure, limit your future work, or trap you in an unsuitable engagement.
The IR35 clause: your starting point
Read the contract for IR35 status. It should say clearly: "inside IR35" or "outside IR35". Ambiguous language is a red flag. Get written confirmation from the client BEFORE you start.
If the contract says "status to be determined" or "subject to IR35 review," this means determination happens later — push back. Get clarity upfront before signing. Don't start a contract where IR35 status is undefined.
IP ownership traps
Watch for: "assignment of all IP in connection with the engagement." This is too broad. It could mean the client owns code you write, frameworks you develop, even methodology you've created for other clients.
Better wording: "Client owns IP of deliverables created specifically for this engagement. Contractor retains IP of tools, frameworks, and methodology developed independently." This lets you reuse your knowledge in future contracts.
Payment terms and termination
Payment terms: How quickly do you get paid? Net 30 (30 days) is standard. Net 60 or Net 90 kills your cashflow. Negotiate for Net 30. Every extra 30 days is money out of your pocket.
Termination: How much notice can each party give? One week? One month? Longer notice protects you. Negotiate for mutual notice (if they give 1 week, you give 1 week) — not asymmetric where you give a month and they give a week.
Red flags: when to push back
Restrictive covenants: 12-month non-compete in a narrow specialism is career-limiting. Negotiate for 3-6 months, or limit to direct clients only (not all contractors in your field).
Unlimited liability: Exposes you personally. Negotiate cap: "liability capped at 12 months of fees" or similar.
All-work-for-hire: "All work and inventions created during term belong to client." Too broad. Carve out independent projects and pre-existing IP.
Get professional review (£200–500) if contract is complex or from an unfamiliar client. Worth every penny.
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