UK software development contracts: who owns the code under the CDPA 1988, IP assignment, fixed price vs T&M, change requests, acceptance and escrow.
Short answer. In the UK, the agency or contractor that writes your code owns the copyright unless the contract assigns it to you in writing, signed by them (Copyright, Designs and Patents Act 1988, sections 11 and 90). A good software development contract also fixes the pricing model (fixed price or time and materials), how changes are handled, how work is accepted, where the code lives, payment milestones, confidentiality, and what happens if either side walks away. Software escrow protects you when you license software you do not own; if the code is assigned to you and committed to your repository, you rarely need it.
This guide is for founders and business owners about to sign with a software supplier. It explains the ownership rules, the clauses that cause most disputes, escrow, and a checklist to take into negotiation.
Last checked: 2 November 2026.
This is a general guide, not legal advice. Magora is a software developer, not a law firm. Check the current guidance and take legal advice for your situation.
Who owns the code? The UK rules
| Situation | First owner of the copyright | What you need |
|---|---|---|
| Your employee writes code in the course of employment | You, the employer, unless agreed otherwise | A clear employment contract |
| An agency or freelancer writes code for you | The agency or freelancer | A written assignment signed by them |
| The supplier reuses its own existing code or libraries | The supplier | A licence to use it, broad enough for your plans |
| Open-source components | Their authors, under the licence | Compliance with each licence |
Sources: CDPA 1988 s11 (first ownership) and s90(3) (an assignment is not effective unless in writing signed by or on behalf of the assignor).
Two details are often missed. First, an assignment is only effective when it is in writing and signed by the supplier, so "you will own the code" in a proposal is not enough. Second, moral rights do not apply to computer programs in UK law, but they do apply to documentation, designs and artwork, so a waiver still has a place.
At Magora, ownership of the source code, designs and IP transfers to the client on payment, and the code is committed to the client's repository as it is written.
The clauses that matter most
| Clause | What to look for |
|---|---|
| Scope and pricing model | A written scope for fixed price, or a day-rate and budget cap for time and materials. See below. |
| Changes | How a change request is raised, priced and approved, and who can approve it. |
| Acceptance | Acceptance criteria per feature, a testing window, and what happens to defects found after acceptance. |
| IP and licences | Assignment of all bespoke work on payment; a licence for any supplier tools you rely on; a list of third-party and open-source components. |
| Repository and access | Code in a repository you own from day one; admin access to hosting, domains and app store accounts in your name. |
| Payment | Milestones tied to deliverables, not dates alone. |
| Confidentiality and data | An NDA from the first conversation; a data processing agreement if the supplier touches personal data. |
| Warranty and support | A warranty period for defects, then a separate support agreement with response times. |
| Exit | Handover of code, documentation and credentials if either side ends the contract, and help with the transition. |
Fixed price or time and materials?
| Fixed price | Time and materials | |
|---|---|---|
| You pay | An agreed price for an agreed scope | A day rate per engineer, billed monthly |
| Best for | A defined scope with an end, such as an MVP after Discovery | A product or roadmap that runs for months, or a changing brief |
| Changes | Through a priced change request | Re-prioritised in any sprint |
| Key clauses | Detailed scope and acceptance criteria | Rates, budget caps, reporting and notice period |
| At Magora | A fixed quote after a two-week Discovery from £3,000 | From £49 an hour per developer; minimum four weeks, then monthly rolling |
More in fixed-price software development in the UK.
A fixed price on a vague brief is the most common source of disputes: either the price is padded or the budget runs out half way. Agree the scope in a short Discovery first. Magora's standard payment model is 25% on Discovery sign-off, 25% at the design milestone, 25% at production-ready and 25% on go-live.
Software escrow: when you need it
In a software escrow arrangement, the supplier deposits the source code and the materials needed to build it with an independent agent under a three-party agreement. If a release event defined in the agreement occurs, such as insolvency or failure to maintain the software, the material is released to you. Providers in the UK include NCC Group, which also offers arrangements for SaaS products that keep access to the hosted environment.
| You probably need escrow when | You probably do not when |
|---|---|
| You license software you do not own and it runs a critical process | The code is assigned to you and sits in your own repository |
| You rely on a supplier's hosted SaaS with no export path | You control the hosting accounts and can deploy without the supplier |
| Investors or regulators require continuity assurance | The software is not business-critical |
We design, build and support web, mobile and bespoke software for UK businesses and start-ups. First release in 6–8 weeks; developers from £49/hour.
Open-source licences: a hidden risk
Most software contains open-source components, which is normal and healthy. The risk is in licence obligations. Under the GPL, giving copies of modified software to others can oblige you to share the source; the AGPL extends that to users who interact with modified software over a network. Ask the supplier for a list of components and licences, and check it before launch or before raising money. This is also a standard part of technical due diligence.
Checklist before you sign
- IP in all bespoke work is assigned to you in writing, on payment.
- Code is in your repository; hosting, domains and store accounts are in your name.
- Scope, acceptance criteria and the change process are written down.
- Payments are tied to milestones you can verify.
- There is an NDA, and a data processing agreement if personal data is involved.
- There is a component and licence list, and a handover plan on exit.
- Support after launch is in a separate agreement with clear response times.
For more on choosing a supplier, see how to choose a software development company in the UK.
About to commission software? Send us your brief: we sign an NDA on day one, build a free working prototype in 5–10 working days, and every contract assigns the code and IP to you on payment. More about our bespoke software development.
Frequently asked questions
Who owns the code a software agency writes for me?
Under UK copyright law the author is the first owner, and an employer owns work its employees create in the course of employment. Code written by an agency or contractor for you stays theirs unless the copyright is assigned to you in writing, signed by them. Make sure your contract does that.
Does a software contract need a moral rights waiver?
Not for the code itself: UK law excludes computer programs from the moral rights to be identified and to object to derogatory treatment. A waiver is still useful for documentation, designs and artwork.
What is software escrow?
An arrangement in which the supplier deposits the source code and the materials needed to build it with an independent escrow agent. If a release event in the agreement occurs, such as the supplier's insolvency or failure to maintain the software, the code is released to the customer.
Do I need software escrow?
If you own the code and it sits in your repository, you usually do not. Escrow matters when you license software you do not own, or depend on a supplier's hosted service, for a business-critical process.
Fixed price or time and materials: which contract should I choose?
Fixed price when the scope is defined and has an end, for example an MVP after Discovery; time and materials when the product will keep changing or the work runs for months. Each needs different clauses on changes and acceptance.
What payment terms are normal for a software project?
Payment against milestones is common. Magora's standard model is 25% on Discovery sign-off, 25% at the design milestone, 25% at production-ready and 25% on go-live.
Sources
- Copyright, Designs and Patents Act 1988, s11 (first ownership)
- CDPA 1988, s90 (assignment must be in writing)
- CDPA 1988, s79 (right to be identified, exceptions)
- CDPA 1988, s81 (derogatory treatment, exceptions)
- GNU: frequently asked questions about the GPL
Pavel Shevtsov
Pavel Shevtsov is a seasoned professional in the field of software development, currently serving as the Managing Director at Magora, a leading software development company known for its innovative solutions. With a passion for leveraging technology to solve complex business challenges, Pavel has played a pivotal role in Magora's growth and success.
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