egos® - Executive Director’s Service Agreement

An individual and a personal service company are separate legal entities.  Thus a formal contract of employment between an individual and the company can define the terms of the relationship – rights, responsibilities, and liabilities - between the two.

The law requires certain formalities in relation to all employees.  These include the requirement for a Statement of Particulars of Terms of Employment to be issued under the Employment Rights Act 1996 to each employee – and for a revised such statement to be issued as and when any of those terms change.

Taking a serious attitude towards compliance with such formalities is a significant element of running a company properly, as a genuine independent business – and as more than just an invoicing vehicle.  Being able to show that the company is indeed properly run and operated as a genuine independent business is a significant factor in any IR35 assessment – it all helps to build a picture. 

Where one seeks to maintain a position of remaining outside IR35, it is important to be able to show that one is indeed running the company properly, as a wholly separate entity, and with proper respect for the legal formalities and requirements.

And structuring the contractual employment relationship between individual and company has the advantage that it’s an IR35-positive step that can be taken by the individual and the company, without requiring the cooperation of anyone else.  The PCG ‘Audit Trail for Consultancy Status’ includes the existence of such a formal contract as one of the items on the checklist.

Additionally, such an agreement may also help to define the parameters of that relationship (and hence have an effect on the relationship that the company may ‘create’ between individual and end-client), and thus build on certain otherwise negative points which have emerged from the O’Murphy decision.

It is also designed to optimize the prospects of being able to claim expenses relating to working at home (taking into account the ‘wholly necessarily and exclusively’ requirement for an employee’s business expenses to be tax deductible).

Intended for the working director of a Personal Service Company, this package includes:

-          Director’s Service Agreement

-          Statement of Particulars of Terms of Employment under the Employment Rights Act 1996

The cost is ₤150.00.

NB:  if you have a split shareholding with a partner and s660A may be a consideration, then this must be discussed with us, to avoid risks of a DSA harming your s660A position.

To request this package, mail me, and include

1                    your name

2                    the company name

3                    the company number

4                    your address

Note that this package is not intended for use in the situation where the relationship between company and individual is wholly ‘arm’s length’ situation, ie where other parties have at least a majority interest in the company – in that situation, certain contingencies (such as formal disciplinary procedures and non-competition restrictions) may adopt a greater importance, and therefore need to be provided for in more depth than is the case with this product.

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This page was last updated on 28th March 2008.

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