You have a client project that needs a strong brand voice. You know a freelance copywriter who can deliver. You agree a day rate, send them the brief, and they start writing.
Simple, right?
Not always. The way you engage that copywriter can trigger IR35. And if it does, you as the agency become responsible for collecting tax and NI that you probably did not budget for.
This is a specific risk that many agency founders overlook. Most IR35 guidance focuses on IT contractors working inside a client's business. But creative freelancers, copywriters, designers, videographers, face a different set of tests. And those tests can catch agencies out.
Here is what you need to know about IR35 freelancers agency engagements when the freelancer is a creative professional working on a client project.
Why Copywriters Are a Higher IR35 Risk Than You Think
The standard IR35 test asks whether the individual would be an employee if they worked directly for the end client. That means looking at control, substitution, mutuality of obligation, and whether the person is genuinely in business on their own account.
Copywriters often fail the substitution test. Hard. Most freelance copywriters do not have a substitute lined up. They are hired for their specific voice, their style, their understanding of a sector. If you say "send someone else in your place", the client says no. That is a strong indicator of employment.
Compare that to a software developer who can send another developer from their limited company. The developer passes the substitution test. The copywriter usually does not.
Here is a real scenario. A 15-person digital agency in Manchester Northern Quarter takes on a six-month retainer for a fintech client. The retainer includes blog posts, landing pages, and email sequences. The agency hires Sarah, a freelance copywriter, at £350 per day. Sarah works from the agency's office two days a week, attends the client's weekly standup, and uses the client's brand guidelines and tone of voice document. She does not have a substitute. She does not work for any other client during that six months.
That engagement is almost certainly inside IR35.
The agency should have issued a Status Determination Statement (SDS) before Sarah started. They did not. HMRC could hold the agency liable for the unpaid tax and NI on Sarah's entire fee, plus interest and penalties.
The Three Tests That Matter for Creative Freelancers
When assessing IR35 freelancers agency engagements, focus on three specific tests. These are the ones that trip up creative professionals most often.
1. Substitution
Can the copywriter send someone else to do the work? Not in theory. In practice. If the contract says "substitution permitted" but the client would never accept a different writer, the clause is meaningless.
HMRC looks at the reality of the arrangement, not the contract wording. If you know the client will reject a substitute, treat the test as failed.
2. Control
Who decides what the copywriter writes? If the client gives detailed briefs, sets deadlines, and reviews drafts line by line, that is control. A genuinely self-employed copywriter would agree the scope and deliver without micromanagement.
The grey area here is brand guidelines. Every agency works to client brand guidelines. That alone does not create control. But if the client is approving every paragraph, you are moving into employment territory.
3. Mutuality of Obligation
Is the client obliged to offer work, and is the copywriter obliged to accept it? On a fixed-term retainer, the answer is usually yes. The client must pay for the agreed hours. The writer must deliver the agreed output.
Genuine self-employment means the writer can turn down work. If your copywriter is on a monthly retainer with no right to refuse specific tasks, mutuality of obligation exists.
What Happens When You Get It Wrong
If HMRC determines that a copywriter should have been inside IR35, the liability falls on the fee-payer. In a standard agency-client-copywriter chain, that is usually the agency.
You become responsible for:
- Income tax at the copywriter's marginal rate (20%, 40%, or 45%)
- Employee NI at 8% on earnings above £12,570
- Employer NI at 13.8% on earnings above the secondary threshold
- The Apprenticeship Levy if your total pay bill exceeds £3 million
- Interest on late payments, currently 7.25%
- Penalties that can reach 100% of the tax due in serious cases
Here is the worked example. Sarah the copywriter earned £63,400 over six months at £350 per day. If HMRC rules that engagement was inside IR35, the agency owes:
- Income tax: roughly £15,400
- Employee NI: roughly £3,900
- Employer NI: roughly £6,800
- Total: roughly £26,100
That is on top of the £63,400 fee the agency already paid. And the agency cannot reclaim the employee NI from Sarah. It is a direct cost to the business.
For a 12-person agency turning over £800k, that is a painful hit.
How to Structure Copywriter Engagements to Stay Outside IR35
You can reduce the risk. It takes planning and the right contract terms. Here is how to structure engagements so the copywriter genuinely operates as a business in their own right.
Use a Substitution Clause That Works
The contract must give the copywriter a genuine right to send a substitute. And you must be willing to accept that substitute if the writer exercises that right. If the client refuses, the copywriter stays on the project but you have evidence that the substitution right is real.
Do not put a substitution clause in the contract if you know the client will never accept it. That is a sham arrangement. HMRC will see through it.
Let the Copywriter Control Their Process
The copywriter should decide when and where they work. They should use their own equipment. They should not attend client meetings unless they choose to. They should not use an agency email address.
Every indicator of integration into the agency or client team pushes the engagement towards IR35.
Keep the Engagement Short and Project-Based
A six-month retainer looks like employment. A two-week project to write five landing pages looks like self-employment. The shorter and more defined the scope, the lower the risk.
If the client needs ongoing copywriting, consider hiring a permanent employee instead. That removes the IR35 question entirely and gives you more control over the output.
Issue an SDS Before Day One
If your agency is medium or large under the off-payroll working rules, you must issue a Status Determination Statement to the copywriter before they start work. The SDS must explain your reasoning and include the client's view if the copywriter is working on a client project.
Most agencies serving the UK market are medium or large. The threshold is two of the following: turnover over £10.2 million, balance sheet over £5.1 million, or more than 50 employees. If you are below that, the copywriter is responsible for their own IR35 status. But the client may still be medium or large, and the rules can cascade down the chain.
Check with your accountant before every new contractor engagement. Do not assume you are small enough to avoid the rules.
What the CEST Tool Tells You (and What It Does Not)
HMRC's Check Employment Status for Tax tool is free to use. It asks a series of questions about the engagement and gives a conclusion: inside or outside IR35.
The tool is directional. It is not definitive. And it is notoriously unreliable for creative roles. The questions are designed with IT contractors in mind. A copywriter who works to a brief and cannot send a substitute will often get an "inside" result even if the real-world arrangement is genuinely self-employed.
Use CEST as a starting point. Then get a professional review from an accountant who understands creative freelancers. Our ICAEW qualified team at Agency Founder Finance reviews IR35 determinations regularly. We can tell you whether the tool's conclusion matches the reality of your engagement.
If CEST says "inside", you should usually accept that result and operate the engagement through payroll. If CEST says "outside", do not stop there. Check the reasoning. Make sure the contract and working practices match.
When the Copywriter Works Through Their Own Limited Company
Many freelance copywriters operate through a personal service company (PSC). They invoice the agency from their limited company. That is the classic IR35 structure.
If the copywriter is inside IR35, you should not pay their PSC. You should operate payroll instead. That means deducting tax and NI from their fee and paying the net amount to the copywriter personally, or to their PSC as a net payment.
Some copywriters will push back. They want to invoice from their limited company to manage their own tax. That is their preference, not your obligation. If HMRC rules the engagement inside IR35, you are liable regardless of how the copywriter wanted to be paid.
Do not let the copywriter's preference dictate your compliance position.
What about Flat Rate VAT and Copywriters?
This is a separate issue but worth mentioning. Many copywriters use the Flat Rate VAT scheme. If you pay their invoices including VAT, you reclaim the input VAT through your own VAT return. That is fine.
But if the copywriter is inside IR35 and you switch to payroll, you stop paying VAT on their fees. The copywriter loses their Flat Rate benefit. That is not your problem, but it can cause friction. Explain it upfront so there are no surprises.
Practical Steps for Agency Founders
Here is what to do before you engage your next freelance copywriter:
- Write a contract that includes a genuine substitution clause. Get the copywriter to confirm they have a substitute available.
- Define the project scope clearly. Use a fixed fee or day rate for a specific deliverable, not an open-ended retainer.
- Do not integrate the copywriter into your team. No agency email, no shared calendar, no mandatory meetings.
- Issue an SDS before the engagement starts. Include the client's view on status.
- If the risk is medium or high, operate the engagement through payroll from day one. It costs more in employer NI but removes the liability risk.
- Review every contractor engagement at least annually. Working practices change. A copywriter who was outside IR35 last year may be inside this year.
If your contractor mix has changed in the last 12 months, ask your accountant before your next year-end. The cost of getting this wrong far outweighs the cost of getting it right.
We work with agency founders across the UK, from Soho PR agencies to Bristol Harbourside digital studios. If you need a second opinion on a specific copywriter engagement, get in touch. We can review the contract, the working practices, and the SDS to give you a clear position.