Commission Agreement (UK)
This Commission Agreement (the “Agreement”) is entered into on [Effective Date] (the “Effective Date”) by and between:
[Principal Name], [Who Principal], with its registered or principal address at [Principal Address], [Principal City], [Principal County], [Principal Postcode], England and Wales (hereinafter referred to as the “Principal”); and
[Agent Name], [Who Agent], with its principal address at [Agent Address], [Agent City], [Agent County], [Agent Postcode], England and Wales (hereinafter referred to as the “Agent”).
The Principal and the Agent are referred to collectively as the “Parties” and individually as a “Party”.
BACKGROUND
WHEREAS, the Principal wishes to appoint the Agent to act as a self-employed commercial agent to promote and sell the Principal’s products and services within the Territory; and
WHEREAS, the Agent wishes to accept such appointment on the terms and conditions set out in this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set out herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
1. APPOINTMENT
1.1 The Principal hereby appoints the Agent as its commercial agent to promote, market, and solicit orders for the following products and services: [Products or Services] (the “Products”) within the following territory: [Agent Territory] (the “Territory”).
1.2 The Agent accepts such appointment and agrees to use its best endeavours to promote the sale of the Products within the Territory in a professional and diligent manner.
1.3 The Agent shall act as a self-employed independent contractor and not as an employee, worker, or partner of the Principal. The Agent has no authority to conclude contracts on behalf of the Principal or to bind the Principal in any way, unless separately authorised in writing by the Principal.
1.4 The Agent shall not represent itself as an employee of the Principal or act in any way that could create the impression that an employment relationship exists between the Parties.
1.5 The Parties acknowledge that where the Agent is an individual acting as a self-employed commercial agent within the meaning of the Commercial Agents (Council Directive) Regulations 1993 (the “Commercial Agents Regulations”), the provisions of those Regulations shall apply to this Agreement to the extent they are applicable and cannot lawfully be excluded.
2. OBLIGATIONS OF THE AGENT
2.1 The Agent shall:
- use its best endeavours to promote and solicit orders for the Products within the Territory;
- act dutifully and in good faith in carrying out its activities as agent for the Principal;
- keep the Principal informed of all matters relating to the Territory and to the Products that are likely to affect the Principal’s business;
- follow all reasonable instructions given by the Principal regarding the promotion and sale of the Products;
- not disclose to any third party any confidential information relating to the Principal’s business, Products, pricing, or customers;
- maintain accurate records of all customer contacts, sales leads, and transactions and provide regular reports to the Principal; and
- not act as agent for any competitor of the Principal without the Principal’s prior written consent.
3. OBLIGATIONS OF THE PRINCIPAL
3.1 The Principal shall:
- provide the Agent with all necessary product information, sales materials, and training to enable the Agent to perform its obligations effectively;
- notify the Agent within a reasonable time of its acceptance or rejection of any order or transaction solicited by the Agent;
- pay the Agent commission in accordance with clause 4 of this Agreement;
- provide the Agent with a written statement of the commission due and the basis on which it has been calculated, together with each commission payment;
- act dutifully and in good faith towards the Agent.
4. COMMISSION
4.1 The Principal shall pay to the Agent commission at the following rate: [Commission Rate].
4.2 Commission shall be calculated and paid in accordance with the following terms: [Commission Payment Terms].
4.3 Commission shall become due when: (a) the Principal has executed the transaction with the customer; or (b) the Principal should have executed the transaction in accordance with this Agreement.
4.4 The right to commission shall be extinguished only if: (a) the contract between the Principal and the customer is not executed for reasons for which the Principal is not to blame; or (b) the contract is cancelled due to a breach by the customer, provided that the Principal has taken all reasonable steps to enforce the contract.
4.5 Post-termination commission shall be payable in the following circumstances: [Post-Termination Commission].
4.6 All payments of commission shall be made in pounds sterling (£) to the bank account notified by the Agent in writing.
4.7 If the Principal fails to pay any commission by the due date, the Agent shall be entitled to charge interest at the statutory rate under the Late Payment of Commercial Debts (Interest) Act 1998.
5. TERM AND TERMINATION
5.1 This Agreement shall commence on the Effective Date and shall continue for [Agreement Term], unless terminated earlier in accordance with this clause.
5.2 Subject to the minimum notice periods prescribed by the Commercial Agents Regulations 1993 (not less than 1 month’s notice during the first year, 2 months’ notice during the second year, and 3 months’ notice thereafter), either Party may terminate this Agreement by giving written notice to the other Party.
5.3 Either Party may terminate this Agreement immediately on written notice if the other Party: (a) commits a material breach of this Agreement that is incapable of remedy or that is not remedied within 14 days of written notice; or (b) becomes insolvent, enters administration, has a receiver appointed, or passes a resolution for winding up.
5.4 On termination of this Agreement, the Agent shall cease to represent the Principal and shall return all of the Principal’s materials, documents, and confidential information in its possession.
6. COMPENSATION OR INDEMNITY ON TERMINATION
6.1 Where the Agent is a self-employed commercial agent within the meaning of the Commercial Agents Regulations 1993, the Agent shall be entitled on termination of this Agreement to either compensation or an indemnity in accordance with Regulations 17 and 18 of the Commercial Agents Regulations 1993, unless the Agreement is terminated: (a) as a result of the Agent’s material breach; or (b) by the Agent, unless the termination is justified by circumstances attributable to the Principal.
6.2 Where the Parties agree that indemnity (rather than compensation) shall apply, the maximum indemnity payable shall be an amount equivalent to one year’s remuneration, calculated from the Agent’s average annual remuneration over the preceding 5 years (or the period of the Agreement if shorter).
6.3 The Agent must notify the Principal of its intention to claim compensation or indemnity within one year of the date of termination, failing which the right shall be extinguished.
7. CONFIDENTIALITY
7.1 The Agent shall keep confidential all information relating to the Principal’s business, customers, Products, pricing, and trade secrets that it obtains in connection with this Agreement, and shall not disclose such information to any third party without the Principal’s prior written consent.
7.2 The confidentiality obligations under this clause shall survive termination of this Agreement for a period of 3 years.
8. TAX AND SELF-EMPLOYED STATUS
8.1 The Agent is responsible for accounting to HMRC for all income tax and National Insurance contributions arising from commission payments received under this Agreement. The Principal shall not deduct income tax or National Insurance from commission payments.
8.2 The Agent shall ensure that it is registered as self-employed with HMRC (or, where the Agent is a company, that it complies with all applicable corporation tax and VAT obligations) and shall indemnify the Principal against any liability arising from the Agent’s failure to do so.
8.3 Where the Agent is VAT-registered, it shall charge VAT on commission payments at the applicable rate and shall issue valid VAT invoices to the Principal.
9. GENERAL
9.1 Entire Agreement. This Agreement constitutes the entire agreement between the Parties in relation to its subject matter and supersedes all prior agreements, representations, and understandings.
9.2 Amendments. No amendment or variation of this Agreement shall be effective unless made in writing and signed by authorised representatives of both Parties.
9.3 Waiver. A failure by either Party to exercise any right or remedy shall not be deemed a waiver of that right or remedy.
9.4 Severability. If any provision of this Agreement is found to be invalid or unenforceable, the remaining provisions shall remain in full force and effect.
9.5 Third Party Rights. A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.
9.6 Governing Law and Jurisdiction. This Agreement and any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with it or its subject matter or formation shall be governed by and construed in accordance with the laws of England and Wales. Each Party irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction to settle any such dispute or claim.
IN WITNESS WHEREOF, the Parties have executed this Commission Agreement as of the Effective Date first written above.
THE PRINCIPAL
Name: [Principal Name]
Address: [Principal Address], [Principal City], [Principal County], [Principal Postcode]
THE AGENT
Name: [Agent Name]
Address: [Agent Address], [Agent City], [Agent County], [Agent Postcode]
Principal
________________
Signature
Date: ________________
Agent
________________
Signature
Date: ________________
What Is a Commission Agreement (UK)?
A Commission Agreement in the United Kingdom sets the services to be provided, the fees, the timetable, and each side's responsibilities for the engagement, and takes its legal force from the Companies Act 2006.
In England and Wales, commission agreements involving self-employed commercial agents who are appointed to negotiate the sale of goods on behalf of a principal may be subject to the Commercial Agents (Council Directive) Regulations 1993 (the “Commercial Agents Regulations”). These Regulations implement EU Directive 86/653/EEC into UK domestic law and remain in force following the UK’s departure from the European Union. They provide important statutory protections for qualifying commercial agents, including minimum notice periods for termination, the right to commission during and after the agency, and the right to compensation or indemnity on termination. Many of these protections cannot be excluded by the parties’ contract.
A commission agreement is distinct from an employment contract (where the agent would be classified as an employee with the associated PAYE and National Insurance obligations) and from a fixed-fee consulting or service agreement (where remuneration is not linked to the results achieved). The commission structure aligns the interests of the Principal and the Agent by rewarding the Agent directly for the business they generate.
Our UK Commission Agreement template is drafted in compliance with the Commercial Agents Regulations 1993 and English common law. It covers the agent’s appointment and territory, commission rate and payment terms, post-termination commission, compensation or indemnity on termination, optional exclusivity and non-solicitation clauses, and governing law confirming the jurisdiction of England and Wales.
The legal framework governing the Commission Agreement (UK) in United Kingdom draws on several key statutes and regulatory bodies. Under the Companies Act 2006, Companies House maintains the register of UK companies. Section 386 of the Companies Act 2006 sets accounting record obligations. The Competition and Markets Authority (CMA) enforces the Consumer Rights Act 2015. The Financial Conduct Authority (FCA) regulates financial services under the Financial Services and Markets Act 2000. The High Court of Justice has jurisdiction under the Senior Courts Act 1981. Parties executing a Commission Agreement (UK) in United Kingdom should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Companies Act 2006 sets the foundational requirements.
When Do You Need a Commission Agreement (UK)?
A Commission Agreement is appropriate whenever a business or individual wishes to appoint a self-employed sales agent or commercial agent to promote and sell its products or services on a commission-only or commission-based basis in England and Wales.
Common situations where a UK Commission Agreement is required include: businesses expanding into new geographical territories who wish to appoint local agents with established contacts and market knowledge; businesses that prefer a variable-cost sales model where remuneration is directly linked to sales performance rather than a fixed salary; manufacturers and distributors who appoint independent sales representatives to sell their products to retailers, wholesalers, or end users; technology and software companies who appoint business development agents to introduce enterprise clients; and service businesses, recruitment firms, and financial services intermediaries who pay referral or introduction fees for new client introductions.
A commission agreement is particularly important where the Agent is an individual who could be classified as an employee if the relationship is not properly structured. An incorrectly classified employment relationship can expose the Principal to significant HMRC liabilities for unpaid PAYE tax and National Insurance contributions, as well as employment law claims for unfair dismissal, holiday pay, and other statutory entitlements. A well-drafted commission agreement that clearly establishes the self-employed status of the Agent and the commercial nature of the relationship is essential to manage this risk.
A commission agreement is also important where the Agent operates within a specific territory and the parties wish to establish the scope of any exclusivity, the territorial boundaries of the Agent’s authority, and the consequences of the Principal making direct sales within the Agent’s territory.
Parties in United Kingdom should prepare a Commission Agreement (UK) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under the Companies Act 2006, Companies House maintains the register of UK companies. Section 386 of the Companies Act 2006 sets accounting record obligations. The Competition and Markets Authority (CMA) enforces the Consumer Rights Act 2015. The Financial Conduct Authority (FCA) regulates financial services under the Financial Services and Markets Act 2000. The High Court of Justice has jurisdiction under the Senior Courts Act 1981. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Commission Agreement (UK)
A well-drafted Commission Agreement for use in England and Wales must address several key provisions, particularly where the Commercial Agents (Council Directive) Regulations 1993 apply to the relationship.
The appointment clause clearly defines the scope of the Agent’s authority: the products or services the Agent is authorised to promote, the geographical territory within which the Agent may operate, and the basis on which the Agent is appointed (exclusive or non-exclusive). Clarity on these points is essential to avoid disputes about whether the Agent is entitled to commission on particular transactions or customers.
The commission clause is the most commercially important provision: it must specify the commission rate (as a percentage of the invoice value or net revenue, or as a fixed amount per transaction), the basis on which commission is calculated, the payment schedule, and the Agent’s entitlement to commission on post-termination transactions. Under the Commercial Agents Regulations 1993, the right to post-termination commission on transactions principally attributable to the Agent’s efforts during the agency cannot be excluded.
The termination and compensation clause must reflect the mandatory requirements of the Commercial Agents Regulations 1993 where they apply: minimum notice periods (1 month in year 1, 2 months in year 2, 3 months in year 3 and beyond), and the Agent’s right to compensation or indemnity on termination. The indemnity route — which is capped at one year’s average remuneration — is often preferred by principals as it provides more certainty than the open-ended compensation calculation.
The independent contractor clause is critical for tax and employment law purposes: it must clearly establish that the Agent is a self-employed independent contractor, not an employee or worker, and that the Agent is responsible for its own HMRC obligations.
The confidentiality clause, the post-termination non-solicitation clause (where included), the exclusivity clause (where included), and the governing law and jurisdiction clause specifying England and Wales are all standard provisions in a properly drafted UK Commission Agreement.
Additional compliance elements for a Commission Agreement (UK) used in United Kingdom include: Under the Companies Act 2006, Companies House maintains the register of UK companies. Section 386 of the Companies Act 2006 sets accounting record obligations. The Competition and Markets Authority (CMA) enforces the Consumer Rights Act 2015. The Financial Conduct Authority (FCA) regulates financial services under the Financial Services and Markets Act 2000. The High Court of Justice has jurisdiction under the Senior Courts Act 1981. Forms-legal.com provides this template as a starting point for United Kingdom-compliant documentation.
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Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Commission Agreement (UK) (United Kingdom) [Legal document template]. Forms Legal. https://forms-legal.com/uk/business/contracts/commission-agreement-uk
"Commission Agreement (UK) (United Kingdom)." Forms Legal, 2026, https://forms-legal.com/uk/business/contracts/commission-agreement-uk.
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title = {Commission Agreement (UK) (United Kingdom)},
year = {2026},
howpublished = {\url{https://forms-legal.com/uk/business/contracts/commission-agreement-uk}},
note = {Free legal document template. Based on Companies Act 2006}
}Also available for these jurisdictions:
Frequently Asked Questions
The Commercial Agents (Council Directive) Regulations 1993 (SI 1993/3053) implement European Directive 86/653/EEC into UK law and provide important statutory protections for self-employed commercial agents — individuals and entities who have continuing authority to negotiate the sale or purchase of goods on behalf of a principal. The Regulations apply automatically to qualifying agency relationships regardless of what the parties’ contract says, and many of their key provisions cannot be excluded by contract. The most significant rights granted by the Regulations include: the right to written particulars of the agency agreement; minimum notice periods for termination (1 month in year 1, 2 months in year 2, 3 months in year 3 and beyond); the right to commission on transactions concluded during or attributable to the agency; the right to compensation or indemnity on termination (except in cases of the agent’s material breach); and the right to see a statement of commission due. These rights remain in force in England and Wales following the UK’s departure from the EU, as the Regulations have been retained in UK law.
Where the Commercial Agents Regulations 1993 apply, a commercial agent is entitled to either compensation or an indemnity on termination of the agency agreement (except in cases of the agent’s material breach or where the agent terminates the agreement without justification). Compensation (the default under English law) is assessed by reference to the damage suffered by the agent as a result of the termination — in practice, this is typically calculated by reference to the value of the agency to the agent on the open market at the date of termination, which can be significant and unpredictable. Indemnity (which must be expressly agreed in the contract) is capped at the equivalent of one year’s average remuneration over the preceding 5 years (or the full period of the agency if shorter) and must be justified by the agent having brought in new customers or significantly increased business with existing customers during the agency. The Lonsdale v Howard & Hallam [2007] UKHL 32 decision by the House of Lords established important principles for calculating compensation under English law, including the “french method” approach based on two years’ commission.
Under Regulation 10 of the Commercial Agents Regulations 1993, a commercial agent is entitled to commission on a transaction when: (a) the transaction has been concluded as a result of the agent’s action; (b) a transaction is concluded with a third party whom the agent has previously acquired as a customer for transactions of the same kind; or (c) where the agent has an exclusive territory, a transaction is concluded with a customer from that territory, even if the agent was not directly involved in the negotiation. Commission becomes due when the principal has executed the transaction with the customer, or when the principal should have done so. The right to commission is extinguished only where the transaction with the customer is not executed and the principal is not at fault, or where the contract is cancelled due to breach by the customer (and the principal has taken all reasonable steps to enforce it). Post-termination commission is also due on transactions concluded after the end of the agency that are principally attributable to the agent’s efforts during the agency period.
Post-termination restrictions — including non-solicitation clauses (preventing the agent from approaching the principal’s customers) and non-compete clauses (preventing the agent from working with competitors) — are enforceable in England and Wales as restraint of trade clauses, but only to the extent they are reasonable in scope, duration, and geographical area and go no further than is necessary to protect the principal’s legitimate business interests. English courts apply a two-stage test: (1) does the principal have a legitimate business interest that the restriction is designed to protect? (2) is the restriction reasonable as between the parties and in the public interest? If a restriction is found to be too wide, the court may apply the doctrine of severance to strike out the offending part and enforce the remainder, or may blue-pencil the restriction to reduce its scope. The legitimate business interests that can be protected include trade secrets and confidential information, customer connections, and (in some cases) the stability of the workforce.
The tax treatment of commission payments to a self-employed agent in the UK depends on the agent’s legal status. A self-employed individual agent is responsible for registering as self-employed with HMRC, filing a self-assessment tax return, and paying income tax and National Insurance contributions on their commission income. The principal does not deduct PAYE tax from commission payments to a genuinely self-employed agent. Where the agent is a limited company, the commission is subject to corporation tax and the company must account for VAT if it is VAT-registered. It is important to correctly classify the relationship between the principal and agent — HMRC applies the IR35 rules (the off-payroll working rules) where an individual provides services through a personal service company but would be treated as an employee if engaged directly. Misclassifying an employee as a self-employed agent can result in significant PAYE and National Insurance liabilities for the principal.
The Commercial Agents Regulations 1993 were originally enacted to implement an EU Directive that applied specifically to the sale of goods, and there has been significant debate in England and Wales about whether the Regulations apply to agents who sell services rather than goods. The leading English case on this point is Parks v Esso Petroleum Co Ltd [2000] EWCA Civ 217, in which the Court of Appeal held that the Regulations did not apply to an agent selling petroleum at a service station because the transaction was classified as a service transaction rather than a sale of goods. However, subsequent cases have taken a more expansive approach, and the position is not entirely settled. Where an agent is involved in selling both goods and services, the principal’s component of the arrangement may qualify under the Regulations even if services are also involved. Parties should take legal advice where there is any doubt about whether the Regulations apply to their particular arrangement.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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