Subcontractor Agreement Template (UK)

A subcontractor agreement is a written contract between a main contractor (the party holding the primary contract with the client) and a subcontractor (a self-employed trades-person or subcontracting business) to carry out a defined part of the works. Under UK construction law it is the document that evidences the commercial relationship, self-employment status, and allocation of risk.

Key Features:

• Scope of works — a clear description of the works, materials, tools, and deliverables so there is no ambiguity about what is "in" and what is "out"
• CIS deductions — verification with HMRC and deductions at the correct rate (gross, 20%, or 30%) under the Construction Industry Scheme
• Payment terms — payment notices, pay less notices, and the right to suspend for non-payment under the Housing Grants, Construction and Regeneration Act 1996
• Self-employment status — clauses addressing IR35, substitution, and control to support a genuine business-to-business arrangement
• Insurance and indemnity — minimum public liability, employers' liability, and an indemnity for losses caused by the subcontractor's negligence
• Health and safety — CDM Regulations 2015 compliance and site rules flow-down
• Termination — notice periods, termination for cause, and for convenience where agreed

How It Differs from an Employment Contract:

A subcontractor is a separate business engaged on commercial terms — not an employee. There is no holiday pay, sick pay, or PAYE. The subcontractor is responsible for their own tax, National Insurance, and insurance. Using the wrong document can trigger HMRC reclassification and backdated tax liabilities.

Our subcontractor agreement is professionally drafted and structured following the Housing Grants, Construction and Regeneration Act 1996, the Finance Act 2004 (CIS), and the CDM Regulations 2015.

Commercial and Tax Risks:

• HMRC reclassification: Without a contract that demonstrates a genuine business-to-business relationship, HMRC can treat your subbies as employees — leaving you liable for backdated PAYE, National Insurance, interest, and penalties going back up to six years.
• CIS penalties: Failure to operate CIS correctly can result in significant fines and the loss of gross payment status for the main contractor.
• Payment disputes: Without a clear payment schedule, notices regime, and variations procedure, disputes over sums due become expensive and slow to resolve.
• Scope creep: "Can you just quickly..." requests without a formal change procedure kill budgets. A written variations clause prevents this.
• Uninsured liability: If a subbie injures a third party, damages the site, or produces defective work and has no public liability insurance, the main contractor is usually on the hook.
• Unfair dismissal claims: If work dries up and you end the arrangement, a subbie with no written contract can try to claim employee status and bring an unfair dismissal claim in the Employment Tribunal.
• IR35 exposure: For limited-company subbies, poor contract wording can leave the engagement "inside IR35" — exposing the fee-payer to tax, NI, and penalties.
• Adjudication surprises: Under the Housing Grants, Construction and Regeneration Act 1996, construction disputes can be referred to adjudication at short notice — the contract terms drive the outcome.

The £15 Question:

A written subcontractor agreement is the cheapest piece of risk management a main contractor can buy. A single CIS penalty, tribunal claim, or payment dispute typically costs thousands — many times the price of getting the paperwork right up front.

A £15 investment in a properly drafted subcontractor agreement is small compared with the cost of any single dispute.

Comprehensive Construction Subcontract Package:

• ✓ Parties, recitals, and reference to the main contract
• ✓ Scope of works, schedule of works, and site details
• ✓ Start date, duration, and completion date
• ✓ Price, fee structure (fixed, day rate, or measured), and invoicing
• ✓ Construction Industry Scheme (CIS) — verification, deduction rates, and monthly returns
• ✓ Payment terms following the Housing Grants, Construction and Regeneration Act 1996
• ✓ Payment notices, pay less notices, and right to suspend performance
• ✓ Retention (where used) and release on practical completion
• ✓ Defects liability period and remedial work procedure
• ✓ Variations procedure — written instructions and agreed pricing
• ✓ Self-employment status, IR35 considerations, and right of substitution
• ✓ Public liability and employers' liability insurance minimums
• ✓ Indemnity for losses arising from the subcontractor's negligence
• ✓ CDM Regulations 2015 and health and safety flow-down
• ✓ Materials, tools, PPE, and site rules
• ✓ Confidentiality and data protection (UK GDPR)
• ✓ Intellectual property assignment for design-related work
• ✓ Non-solicitation of staff and clients
• ✓ Termination for convenience and for cause
• ✓ Dispute resolution and adjudication under the Scheme for Construction Contracts
• ✓ Governing law: England and Wales
• ✓ Clear signing blocks for both parties

The agreement is drafted to meet the formal requirements of the Housing Grants, Construction and Regeneration Act 1996 and the Finance Act 2004.

Related documents: Main contractors also often use an Employment Contract for direct staff, NDA for confidential projects, and Consultancy Agreement for non-construction professional services.

Don't Make These Critical Errors:

• Using a US template: American templates reference "attorneys", "mechanic's liens", and state law — none of which apply in the UK. Always use a document drafted to UK law.
• No CIS clause: If construction operations are in scope, CIS must be addressed. Missing CIS wording can leave the main contractor liable for under-deducted tax for up to six years.
• Vague scope of works: "Build the extension" is not a scope. Specify drawings, specifications, materials, and acceptance criteria.
• No variations procedure: On-site "can you just..." requests need a written instruction, agreed price, and programme impact — otherwise they become disputes.
• Missing Construction Act notices: The Housing Grants, Construction and Regeneration Act 1996 requires payment notices and pay less notices. Without them, the default "notified sum" rules apply and main contractors lose the right to dispute amounts.
• Weak IR35 wording: For limited-company subbies, a weak or fettered right of substitution and heavy control clauses can push the engagement inside IR35.
• No insurance minimums: Specify public liability (typically £2m–£5m) and employers' liability (£10m minimum, legally required if the subbie has employees).
• Ignoring CDM 2015: Principal contractor duties, site rules, and RAMS flow-down are not optional on most commercial sites.
• No retention or defects regime: Retention (usually 5% released on practical completion plus 5% at end of defects liability) is industry-standard and protects against snags.
• No termination clause: Without a clear exit, both parties are stuck — and disputes about whether termination was lawful are expensive.
• Not getting it signed: An unsigned agreement is evidence, but a signed one is binding. Get wet-ink or electronic signatures from both parties before work starts.

Our subcontractor agreement addresses each of these issues with clear, UK-specific drafting.