An IR35 overview for UK video production companies hiring freelancers

What to take away

What IR35 means for a UK video production company hiring freelancers

IR35 is the set of tax rules that asks a single question. If the freelancer had been hired directly instead of through their own limited company, would they have been an employee for tax purposes? If yes, the engagement is inside IR35. If no, it is outside.

The governing legislation is the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). Chapter 8 covers the IR35 rules for services provided through an intermediary; Chapter 10 covers the off-payroll working rules for public authorities and medium or large clients.

A video production company hires camera operators, editors, sound recordists, producers and runners through personal service companies every week. Each engagement carries its own answer. A one-day shoot in Salford differs from a rolling twelve-month retainer for a branded content series.

The rules matter because the tax treatment follows the answer. Outside IR35, the freelancer's company invoices the production company and handles its own tax. Inside IR35, the fee payer operates PAYE on the deemed employment income.

HMRC publishes the underlying business and self-employed rules that frame this, from registering as self-employed to running a company. The same framework covers freelance video producers working through their own vehicles. Business and self-employed - GOV.UK

Tax obligations for video production businesses, including IR35, sit alongside VAT, Corporation Tax and payroll duties. A production company that pays freelancers must understand which of those duties apply to each payment. Money and tax - GOV.UK

Hiring also brings employment law into play, even where the engagement is genuinely business to business. The boundaries between worker, employee and contractor shape rights and liabilities. Employing people - GOV.UK

Getting this wrong is not only a tax problem. It affects insurance, confidentiality, credit and the ability to move crew between projects without creating implied employment. That is why production companies increasingly treat status as a commercial contract issue, not an afterthought. See how this connects to commercial contracts in adjacent agency work.

Inside and outside IR35: the HMRC status tests applied to crew roles

HMRC status tests explained in plain terms come down to a handful of questions. No single test decides the outcome. HMRC and the tribunals weigh the whole picture, and the contract is only part of it.

Control

Control asks who decides what is done, how, when and where. A director who tells a freelance DoP where to stand, which lens to use and when to break for lunch points towards employment. A DoP who is hired for their look and left to light the scene points away from it.

Substitution

Substitution asks whether the freelancer can send someone else. A genuine right of substitution, exercised or not, supports a business-to-business engagement. A clause that requires the production company's approval of any substitute weakens the right.

Mutuality of obligation

Mutuality asks whether the company must offer work and the freelancer must accept it. A single shoot with no obligation to offer the next one looks outside IR35. A rolling arrangement where the freelancer is expected to be available every week looks inside.

Financial risk

Financial risk asks who carries the cost of getting it wrong. A freelancer who quotes a fixed fee, provides their own kit and can make a loss on a badly priced job carries risk. One paid by the day regardless of output carries less.

Part and parcel

Part and parcel asks whether the freelancer is integrated into the organisation. A crew member with a staff email address, a place in the org chart and an invite to the Christmas party looks more like an employee.

The table below applies these tests to common crew roles. It is a guide, not a determination, because every engagement turns on its own facts.

A production company that runs the same tests across its roster will spot the roles where the answer is not obvious. Those are the ones to document. If output is growing and roles are blurring, the same logic applies to how a business splits team roles as headcount rises.

Deemed employment, PAYE and the off-payroll working rules

Deemed employment means the freelancer's company is treated as if it employed the worker for tax purposes on the income from that engagement. The off-payroll working rules then place the PAYE obligation on the fee payer, not on the freelancer's company.

For a video production company, the fee payer is usually the company that contracts with the freelancer's personal service company. It must deduct income tax and employee National Insurance from the deemed employment payment, and pay employer National Insurance on top.

The freelancer's company still invoices, but the amount paid net of PAYE is lower. The production company must report through its payroll and pay the deductions to HMRC on time.

Where the end client is a public authority or a large private company, the client may be the fee payer even though the production company sits in the chain. That happens when the client is the one that determines status and the production company is an intermediary.

Getting the payroll wrong creates liabilities that outlast the shoot. HMRC can recover unpaid PAYE, interest and penalties from the fee payer, and the production company may struggle to recover the money from a freelancer who has already spent it.

The rules also interact with VAT and Corporation Tax reporting. A production company that pays freelancers across several projects should keep its payroll and its accounts aligned, rather than treating status as a one-off contract question. This is part of running operations without the guesswork as volume grows.

Contract wording that supports a genuine business-to-business engagement

Contract wording guidance starts with a simple rule. The contract should describe what actually happens on the shoot. A document that promises substitution, control and no mutuality while the working practice delivers the opposite will not protect anyone.

A written contract should state the services, the fee and the deliverables. It should say who provides kit, who carries insurance and how the freelancer is paid. It should not read like an employment contract with the words changed.

Clauses that help

Clauses that hurt

• A job title that mirrors an internal role, such as senior editor, with the same reporting line.

Where a production company does need to manage conduct and performance, it should use its own supplier terms rather than employment procedures. Employment contract requirements for staff are a separate matter from supplier terms. Contracts of Employment | Factsheets | CIPD

If a dispute does arise with a contractor, the production company should follow a fair process and document it. Acas sets out how discipline and grievance procedures work in practice. Discipline and grievance | Acas

Contract wording is not a substitute for the right working practice. It is evidence of it. A production company that writes a careful contract and then manages the freelancer like an employee has the worst of both worlds. Sound supplier terms sit alongside the checks covered in vendor due diligence when bringing new crew into a roster.

Substitution, control and mutuality tested against real production roles

A worked example shows how the tests interact. Take a Manchester production company booking a freelance editor for a six-part branded content series.

The editor works from their own studio, uses their own edit suite and invoices a project fee. The production company gives notes on cuts but does not set the editor's hours. The editor can send a trusted colleague if they are double booked, and the production company has no right to refuse without cause.

There is no promise of work after the series. On those facts, the engagement leans outside IR35.

Change one fact and the answer moves. If the production company requires the editor on site from nine to six, provides the edit suite and refuses substitution, the engagement starts to look like employment. The contract may still say outside, but HMRC will look at what happened.

Now take a freelance series producer on a rolling contract for a broadcaster. The broadcaster sets the schedule, the producer manages staff and attends weekly planning meetings. The producer cannot send a substitute and is expected to be available for the run of the series. That engagement leans inside IR35, and the fee payer may need to operate PAYE.

A third case: a freelance sound recordist booked for a two-day location shoot in Cardiff. The recordist brings their own kit, follows the director's brief, and has no ongoing commitment after the shoot. Substitution is possible in principle. This looks outside IR35.

The pattern is consistent. Control, substitution and mutuality move together. A role with high control, no substitution and ongoing mutuality is the one to worry about. A role with low control, real substitution and no ongoing commitment is the one that supports a genuine business-to-business engagement.

Production companies should test each recurring role against these facts before the shoot, not after. The same discipline applies when a business decides which video marketing agencies hire to make as output grows, because each new role changes the pattern.

Small company exemption and who carries the status determination

The small company exemption decides who makes the status determination. For small clients, the freelancer's own company remains responsible for deciding whether IR35 applies. For medium and large clients, the client makes the determination and issues a Status Determination Statement.

A company is small for these purposes if it meets two or more tests. The first is annual turnover of no more than 10.2 million pounds. The second is a balance sheet total of no more than 5.1 million pounds. The third is no more than 50 employees. A production company below those thresholds is a small client.

For a small video production company, the practical effect is that the freelancer's personal service company still decides status and accounts for any deemed employment. The production company does not have to issue a Status Determination Statement or operate PAYE on the freelancer's behalf.

That changes when the production company grows past the thresholds, or when the end client is a large organisation. The client then carries the determination, and the fee payer operates PAYE where the engagement is inside IR35. The status determination must be given to the freelancer and to the fee payer in the chain.

For Chapter 10 engagements, the client must take reasonable care to reach the status conclusion and give a Status Determination Statement (SDS), with reasons, to the worker and the party it contracts with. The statement should pass down the contractual chain to the fee payer. If the worker or deemed employer disagrees, they can make representations to the client; the client must consider them and respond within 45 days, either confirming the determination with reasons or issuing a revised SDS. The original determination remains in place while the client considers the disagreement.

A production company that is small should not assume it always will be. Growth in turnover or headcount can move it into the medium or large category, and the administrative burden moves with it. Companies House filings and payroll records are the evidence of size.

Where a production company is the fee payer but not the client, it should get the determination in writing before the invoice is paid. Without it, the production company can end up carrying a liability it did not create. This is the same discipline that underpins good supplier terms across agency work.

Record keeping, CEST and defending an HMRC enquiry

CEST is HMRC's Check Employment Status for Tax tool. It asks a series of questions about the engagement and returns an indication of whether the off-payroll working rules apply. It is free and it produces a record of the answers given.

CEST is a starting point, not a final answer. It does not cover every fact pattern, and HMRC expects users to read the result alongside the actual working arrangements. A CEST result that says outside IR35 will not save a production company whose working practice says otherwise.

CEST asks about the engagement and working arrangements, including control, the right to provide a substitute and financial risk. Keep the completed answers and result with the contract and evidence supporting those answers. HMRC says it will stand by a CEST result where the information supplied is accurate and complete; if the facts are wrong or the working arrangements change, the result may no longer apply.

Record keeping is what defends an HMRC enquiry. A production company should keep:

Records should be kept for at least the period HMRC can enquire into the relevant tax year. For PAYE, that is generally four years after the end of the tax year, though longer periods apply where HMRC suspects carelessness or deliberate behaviour.

If HMRC opens an enquiry, the production company should be able to show the determination process, the evidence behind it and the payments made. A file that contains only a contract and a CEST printout is thin. A file that shows the working practice is stronger.

A production company should also review its roster. Freelancers who have worked on the same terms for years, on the same client account, with the same reporting line, are the ones most likely to attract attention. The same review process applies when running checks on new suppliers.

Reviewing freelance terms before the next shoot

A review before the next shoot is cheaper than a review after an HMRC letter. The checklist below covers the main points a production company should confirm for each engagement.

A production company can run this review at the point of booking, before the first call sheet goes out. It takes minutes per engagement and creates a record that will matter if HMRC ever asks.

For recurring roles, the review should happen at least once a year. Working practices drift. A role that started outside IR35 can move inside as the client takes more control, extends the engagement and restricts substitution.

Where a role has drifted inside, the production company has options. It can change the working practice, move the freelancer onto payroll, or engage a different supplier. What it should not do is leave the arrangement as it is and hope the contract covers it.

A video production company that treats status as part of booking, not as a tax afterthought, will find the process becomes routine. The same discipline supports steady delivery as the roster and the client list grow.

Common questions