In 2021, the UK film and television industry braced for a dramatic shift in how it taxes creative professionals. When the off-payroll working rules (commonly known as IR35) extended from the public sector to the private sector in April, production companies suddenly faced a choice: determine the tax status of every contractor or stop engaging them altogether. The result was immediate and painful.
According to the Creative Industries Council, 54% of people working in film and video production were self-employed in 2019. But following IR35 implementation in the private sector, many found themselves unable to secure outside-IR35 roles. Some productions halted filming. Others froze hiring. IR35 wasn’t just a tax rule; it became an existential question for creatives working as contractors. Today, whether you’re a freelance producer, cinematographer, designer, or musician working through a limited company, IR35 determines not just your tax bill, but your entire take-home income.
What is IR35 and why does it matter for creatives?
IR35 is shorthand for the Intermediaries Legislation contained in Chapter 8 of the Income Tax (Earnings and Pensions) Act 2003. The 2017 and 2021 reforms (known as the off-payroll working rules in Chapter 10 of the same Act) are what most creatives now deal with today. The legislation was designed to prevent tax avoidance by people HMRC calls ‘disguised employees’: professionals who work under conditions similar to employment but receive payment through their own limited company to reduce their tax burden.
The effect of IR35 for creatives
The impact of IR35 for creatives has been complex and significant. When more than half of film and TV production roles were self-employed, the distinction between genuine independent contractors and disguised employees became harder to draw. A cinematographer might work on a single production for six months with total creative control over their work (suggesting self-employment), yet work on-set during client-mandated hours for a single client (suggesting employment). According to HMRC’s guidance, if the relationship resembles employment, the contractor should pay employment-level tax.
Tax impact of IR35
A contractor deemed inside IR35 keeps roughly 55 pence of every pound billed, after PAYE tax, employee National Insurance, and employer National Insurance are deducted. Outside IR35, that same pound stretches to around 70 pence after self-assessment tax/NI at basic rate. For a freelancer billing £50,000 annually, the difference between inside and outside IR35 can amount to £7,500+ in net income lost.
Inside IR35 vs Outside IR35: who determines your status?
Since April 2021, responsibility for determining whether a contractor is inside or outside IR35 has sat with the client (also called the ‘end client’ or ‘engager’) but only if that client is medium or large under the Companies Act test. The threshold changes came into effect from 6 April 2025, but responsibility shifts in practical terms from April 2027.
Determining client size
From April 2025, a client is defined as small if it meets at least TWO of:
- turnover of £15 million or less (increased from £10.2 million),
- balance sheet total of £7.5 million or less (increased from £5.1 million), or
- fewer than 50 employees.
A business must meet these criteria for two consecutive financial years to change its IR35 classification.
If a client is small, responsibility for determining IR35 status reverts to you (the contractor’s limited company) under the original Chapter 8 IR35 rules.
When clients determine your status, they must issue a Status Determination Statement (SDS) before your engagement begins. The SDS explains whether you’re inside or outside IR35 and the reasoning behind that decision. If you disagree with the SDS, you have a dispute process: the client must reconsider, and if they won’t budge, you can escalate to HMRC.
How HMRC tests whether creatives are inside or outside IR35
According to HMRC’s Employment Status Checker, five factors typically matter most for determining employment status:
Control: Who decides how, when, and where the work is done? If the client mandates your hours, methods, or daily tasks, that suggests employment. If you control these decisions, it suggests self-employment.
Substitution: Can you send a suitably qualified substitute at your own cost if you can’t do the work? A genuine right to substitute (not just a contractual clause, but practical reality) strongly suggests self-employment.
Mutuality of Obligation (MOO): Is there an ongoing obligation for the client to provide work, and for you to accept it? Project-specific work with no expectation of future engagements suggests self-employment. Ongoing, recurring work suggests employment.
Integration into the client’s business: Are you integrated into the client’s day-to-day operations, attending team meetings, following company policies, and working alongside employees? Integration suggests employment.
Financial risk and investment: Do you invest in equipment, fund your own business costs, market your services to multiple clients, and bear financial risk? Real financial exposure suggests self-employment.
The financial impact: how inside IR35 changes your take-home pay
Understanding the tax maths is essential. If you’re inside IR35 with a £450 daily rate, your client (or the fee-payer/agency) must deduct 20% income tax, approximately 8% employee National Insurance, and pay 15% employer National Insurance. Your net daily rate drops to around £315.
That’s why many creatives negotiate higher rates for inside IR35 roles. A contractor previously billing £50,000 annually outside IR35 might need to ask for £65,000-£70,000 as an inside IR35 role to maintain the same net income. However, not all clients will pay the uplift, especially if they’ve already committed to a budget.
Managing double taxation
In April 2024, HMRC introduced a ‘set-off’ mechanism to address double-taxation concerns. If the client is later found to have been wrong about your status, any tax you’ve already paid through PAYE can be credited against what the client owes HMRC, reducing the liability. This was meant to give clients more confidence issuing outside IR35 determinations—though many still take the conservative approach and deem contractors inside IR35 regardless.
Practical steps for creatives: protecting your outside IR35 status
If you want to defend an outside IR35 determination or argue for one, document your self-employment status rigorously. Keep evidence of: work for multiple clients (not just one), investment in your own equipment and software, marketing and business development activities, samples of your work showing creative control, and communications demonstrating you control how you deliver your work.
Protecting yourself
When negotiating contracts, ensure substitution clauses are genuinely operable, avoid signing exclusive arrangements, retain control over working methods where possible, and work on discrete projects rather than open-ended arrangements. If you receive an SDS you disagree with, challenge it formally in writing, citing specific factors in your favour, and ask the client to reconsider.
Take professional advice
Finally, coordinate IR35 strategy with your accountant. Recent IPSE research (2025) shows 26% of contractors are currently out of work, with 56% directly attributing unemployment to IR35 changes. Specialist advice on contract language, working practices, and HMRC compliance is no longer optional, it’s essential insurance.
IR35 has fundamentally reshaped how creatives work and get paid. It’s not going away, but neither is the ambiguity. The difference between inside and outside IR35 can cost you thousands annually, making it worth the investment in proper legal and tax advice from an accountant specialising in creatives to protect your status. If you need help with any aspect of IR35, give us a call on 020 8446 8100 or complete our contact form now.
Frequently Asked Questions: IR35 for Creatives
1. If I work through a limited company, am I automatically inside IR35?
No. Working through a limited company (known as a PSC or Personal Service Company) does not automatically mean you are inside IR35. Your status depends on the nature of your working relationship with the client, not your business structure. HMRC looks at factors like control, substitution, mutuality of obligation, integration, and financial risk to determine whether you are genuinely self-employed (outside IR35) or a disguised employee (inside IR35).
2. Who is responsible for determining whether I am inside or outside IR35?
Since April 2021, the responsibility depends on the client’s size: medium and large clients (including public sector organisations) must determine your status and issue a Status Determination Statement (SDS). Small clients (as redefined from April 2025) are exempt, and responsibility reverts to you and your limited company. From April 2027 onwards, these threshold changes will begin to take practical effect in IR35 determinations for most businesses meeting the new small company criteria.
3. If a client determines I am inside IR35, what happens to my pay?
The client (or the fee-payer, often an agency) becomes responsible for deducting income tax and employee National Insurance from your fees, and for paying employer National Insurance to HMRC on your behalf. The result is that your take-home pay is typically 30% lower than the billed rate: on a £450 daily rate inside IR35, you receive approximately £315 after tax and NI deductions.
4. What can I do if I disagree with an inside IR35 determination?
You have a right to dispute the decision: request in writing that the client reconsider their determination, providing evidence of factors that support outside IR35 status (such as control of working methods, genuine substitution rights, or financial risk). If the client does not change the determination, you may escalate to HMRC. From April 2024, if HMRC later agrees you should have been outside IR35, any tax you paid through PAYE will be credited against the client’s liability, reducing double taxation risk.
IR35 Advice for Creative Professionals
Green & Peter works with freelance creatives, producers, and production companies across North London to manage IR35 determinations and protect outside IR35 status. We review Status Determination Statements, advise on contract language, and coordinate IR35 strategy with overall tax planning. If you’ve received an inside IR35 determination you disagree with, or you’re setting up a new creative business as a limited company, call us on 020 8446 8100 or complete our contact form to discuss your situation.
About the author
Robert founded Green & Peter in 1993 with the mission of providing specialist accounting support to creative professionals, producers, and performers. With over 30 years of experience in the creative industries and media, he understands the unique tax challenges facing freelance creatives and the impact IR35 has on their livelihoods. Green & Peter specialises in translating complex tax rules into practical, actionable guidance.
