If you run an agency that regularly hires freelance copywriters, you need to know where you stand on IR35. Get it wrong, and HMRC can come after you for unpaid tax, National Insurance, and interest on the copywriter's deemed employment income. That bill can run into five figures for a single engagement.

The challenge is that copywriting sits in a grey area. A copywriter can be clearly in business on their own account, or they can effectively be an employee with a different payment structure. The difference is not about what job title they have. It is about how you engage them, what control you exercise, and whether the reality matches the contract.

This article walks through the specific tests HMRC applies to determine whether a freelance copywriter is inside or outside IR35 for your agency. We use real scenarios, not theory.

What IR35 Actually Means for Your Copywriter Engagement

IR35 is HMRC's off-payroll working legislation. It is designed to catch individuals who work like employees but structure themselves as limited company contractors to pay less tax. When IR35 applies, the copywriter is treated as a deemed employee for tax purposes. The agency (or the fee payer) must deduct PAYE and National Insurance from the copywriter's invoices and pay employer NI on top.

Since April 2021, medium and large agencies in the UK are responsible for determining the IR35 status of their contractors and issuing a Status Determination Statement (SDS) before the engagement starts. If you are a small agency (meeting two of: turnover under £10.2m, balance sheet under £5.1m, under 50 employees), the responsibility sits with the copywriter's own limited company. But even then, HMRC can still investigate and reclassify the engagement.

For most agency founders reading this, you are the fee payer. That means you carry the risk.

The Three Tests That Decide IR35 Status

HMRC and the tribunals focus on three core tests. Every other factor feeds into one of these.

1. Substitution

Can the copywriter send someone else to do the work? If the contract says "personal service only" and the copywriter must turn up themselves, that points to inside IR35. If they can substitute another competent writer, and you would accept that substitution, that points outside.

Here is the catch. A substitution clause in the contract is not enough. HMRC will check whether the substitution right is genuine and realistic. If the copywriter has never exercised it, and there is no practical way they could, HMRC will argue it is a sham.

Real example: A 12-person digital agency in Manchester Northern Quarter hired a copywriter to produce weekly blog posts. The contract had a substitution clause. But the copywriter was the only person who knew the client's tone of voice and had built relationships with the account managers. Substitution was technically allowed but practically impossible. HMRC viewed this as inside IR35 on review.

If you want to stay outside IR35, you need to accept genuine substitution. That means the replacement must be someone the copywriter finds and pays, and you must not have a veto over who it is beyond reasonable competence checks.

2. Control

How much control do you exercise over how, when, and where the copywriter works? This is the biggest factor for copywriters.

Inside IR35 indicators:

  • You set the copywriter's working hours (9-5, specific days per week)
  • You require them to work at your office or on your premises
  • You direct the specific wording, structure, and style of every piece
  • You review and reject work on a subjective basis (not just factual errors)
  • You provide the software, laptop, or equipment
  • You manage their workload and prioritise their tasks

Outside IR35 indicators:

  • The copywriter sets their own schedule and deadline approach
  • They work remotely from their own location
  • You give a brief and leave the creative execution to them
  • You accept their professional judgment on tone, structure, and approach
  • They use their own equipment and software
  • You engage them project-by-project, not on a continuous retainer

Copywriting is a creative profession. If you are hiring a copywriter for their expertise, you should not be micro-managing their output. If you are, ask yourself whether you actually need an employee instead.

3. Mutuality of Obligation (MOO)

This is the legal concept that determines whether there is an ongoing obligation for you to offer work and for the copywriter to accept it. Inside IR35, MOO exists. The relationship is continuous. Outside IR35, each engagement is a separate contract with no expectation of ongoing work.

Inside IR35 indicators:

  • The copywriter has a regular weekly or monthly retainer with no end date
  • You expect them to be available when you need them
  • They do not have the right to refuse work without a good reason
  • They are treated as part of the team (included in meetings, given a company email address)

Outside IR35 indicators:

  • Each project is a separate contract with a defined scope and fee
  • The copywriter can turn down work without penalty
  • You have no obligation to offer them future work
  • They work for multiple clients simultaneously

Many agency founders keep copywriters on rolling retainers because it is convenient. That convenience comes with IR35 risk. If the copywriter is on a monthly retainer producing a set number of pieces per month, and has done so for 18 months, HMRC will argue that is employment in all but name.

Other Factors HMRC Considers

Beyond the three core tests, HMRC will look at the wider picture. These factors are secondary but can tip the balance.

Financial Risk

Does the copywriter bear any financial risk? If they are paid per project and must cover their own costs (software, equipment, insurance, training), that points outside IR35. If they are paid a fixed monthly sum regardless of how much work they do, that points inside.

Part and Parcel

Is the copywriter integrated into your agency? Do they attend team meetings, use your email domain, have a company LinkedIn title, or appear on your website as part of the team? All of these point to inside IR35.

Right of Replacement

If the copywriter is unavailable, can you simply not pay them and find someone else? Or do you expect them to arrange cover? If you expect them to arrange cover, that is closer to employment.

How to Document Your Decision

If you determine the copywriter is outside IR35, you must issue a Status Determination Statement (SDS) before the engagement begins. The SDS must state the conclusion and the reasons for it. You must also have a process for the copywriter to challenge the decision.

HMRC can request your SDS at any time. If your SDS is poorly reasoned or contradicts the working practices, you will lose a tribunal case. The contract alone is not enough. The working practices must match the contract.

Here is what a good SDS for an outside IR35 copywriter looks like:

  • Confirms the engagement is for a specific project with defined deliverables
  • States the copywriter has the right of substitution and has confirmed they understand this right
  • Confirms the copywriter sets their own schedule and uses their own equipment
  • States the copywriter is responsible for correcting their own errors at their own cost
  • Confirms the copywriter works for multiple clients
  • Includes a date for review if the engagement extends beyond 12 months

If you determine the copywriter is inside IR35, you must operate PAYE on their invoices and pay employer NI. You should also issue an SDS confirming the inside status. The copywriter cannot opt out of IR35. It is a legislative determination, not a choice.

Common Mistakes Agency Founders Make

Mistake 1: Relying on the CEST tool. HMRC's Check Employment Status for Tool is directional guidance at best. It is known to be unreliable for complex arrangements, and it does not handle creative roles well. Do not use CEST as your sole basis for an SDS. Use it as a starting point, then apply professional judgment.

Mistake 2: Copy-pasting a contract from a template. A standard contractor agreement will not cover the specific IR35 tests for a copywriter. Your contract needs bespoke clauses on substitution, control, and MOO that reflect how you actually work together.

Mistake 3: Treating a retainer as outside IR35. A monthly retainer for ongoing copywriting work is one of the strongest indicators of inside IR35. If you want to keep the copywriter outside, you need to structure each month as a separate project with its own scope and fee, and the copywriter must have the right to refuse.

Mistake 4: Ignoring the working practices. The most beautifully drafted outside IR35 contract is worthless if the copywriter sits in your office every Tuesday, uses your laptop, and takes direction from your account manager. HMRC will look at what actually happens, not what the paper says.

Real Scenario: Outside IR35 Copywriter

Here is an example of a copywriter engagement that would clearly be outside IR35.

A 15-person creative agency in Bristol Harbourside hires a freelance copywriter to produce a one-off website copy project for a new client. The copywriter quotes a fixed fee of £3,400 for the project. They use their own laptop and software. They work from their home office. They set their own hours and deliver the copy by the agreed deadline. The agency gives a brief but does not direct the specific wording. The copywriter has the right to subcontract the work to another writer if needed, and the agency accepts that. The copywriter has three other clients they work for simultaneously. Once the project is complete, there is no obligation for further work.

This is outside IR35. The SDS should reflect all of these factors.

Real Scenario: Inside IR35 Copywriter

Now consider this. A 25-person digital agency in Soho hires a copywriter to produce two blog posts per week, every week. The copywriter is paid a monthly retainer of £2,800. They are expected to work 9-5 on Tuesdays and Thursdays in the agency's office. They use the agency's MacBook and are given an agency email address. They attend the weekly content team meeting. The content manager reviews and edits every draft. The copywriter has been doing this for 14 months with no end date. They do not work for any other clients.

This is inside IR35. The agency should have been operating PAYE and NI from day one. If HMRC investigates, the agency will owe back taxes, interest, and potentially penalties.

What to Do If You Are Unsure

If your copywriter engagement falls somewhere between these two scenarios, you need to take advice before the engagement starts. As ICAEW qualified accountants, we review IR35 status for agency clients regularly. We look at your contract, your working practices, and your specific facts. We then issue a written opinion that you can rely on for your SDS.

If your contractor mix has changed in the last 12 months, or if you have copywriters on rolling retainers that have been running for more than a year, ask your accountant before year-end. The cost of a professional review is a fraction of the cost of an HMRC enquiry.

For more on how IR35 affects different agency roles, see our guide on contractors and IR35. If you work specifically with marketing agencies, our marketing agency page covers the specific compliance issues that apply.

Final Point

IR35 is not about the job title. It is about the reality of the engagement. A freelance copywriter can be inside or outside depending entirely on how you structure the relationship. The key is to decide intentionally, document your reasoning, and make sure the working practices match the contract.

Get that right, and you remove a significant HMRC risk from your agency.