Creative businesses love flexibility. You scale up for a project, bring in the right talent, plug the gaps and keep the work flowing smoothly. And the easiest way to do that is often to hire freelancers.
But there’s one not-so-creative side to this: getting the status right.
Whether someone should genuinely be treated as a freelancer — or should actually be on your payroll — is something HMRC take very seriously.
Get it wrong, and the fallout isn’t just admin headaches. We’re talking unexpected tax bills, penalties, backdated employer’s NIC, and tricky conversations you’d much rather avoid.
Here’s what creative business owners need to know.
Think of employment status as a simple question:
Are you buying a service… or hiring a worker?
It’s not up to you or the freelancer to “decide” based on preference.
Employment status is determined by the facts of the working relationship — not the contract label, not what your mate's agency does, and not how the person invoices you.
For a small agency, those numbers can be eye-watering.
Freelancers typically run their own business and control how they work. Signs someone is truly self-employed include:
They decide how, when and where the work is done — not you.
They can send someone else to do the job (even if they rarely do).
They bring their own gear — cameras, software, studio kit, editing suite, etc.
They don’t rely on your agency as their only income.
They quote for work, correct mistakes at their own cost, and can make a profit or a loss.
Freelancers are typically brought in for specific outcomes (e.g. "deliver this film edit", "build this website", "craft this brand identity").
If your working relationship looks like a typical employee relationship… HMRC will treat it like one.
Here’s where agencies often slip up.
If any of this sounds familiar, you may need to rethink the arrangement:
Even loosely (“We need you in from 10–4 each day until the project is done”).
Or they need your permission to take on other work.
Laptop, camera, software licence, desk space, etc.
Checking in daily, setting priorities, approving holidays.
If something goes wrong, the cost falls on you — not them.
Regular Monday meetings, Slack channels, team calls, client presentations.
This is classic employment, even if there's no employment contract.
If your freelancers operate through their own limited companies (PSCs), IR35 comes into play.
Medium and large companies must make the IR35 status decision.
Small companies (as defined by Companies Act) don’t, meaning the contractor self-assesses — but that doesn’t remove your wider risk around employment status.
Creative work naturally looks like employment:
It’s easy to slip from "freelancer" to "staff member" without noticing, especially as projects scale.
Here’s what I recommend to agencies:
A quick 10–15 minute check can save thousands later.
It’s a starting point, not the final word.
If the contract says “substitution allowed” but your culture says “never”, HMRC will spot the mismatch.
If they need to be that integrated, they probably need to be on payroll.
The reasoning behind your decision, notes from the assessment, and copies of the freelancer’s own business insurance, portfolio or multiple-client list.
Working relationships evolve — so does their status.
It’s not just about avoiding trouble. Clear status decisions mean you can:
And, importantly, help the people you hire feel respected and properly treated.
In the creative world, lines blur. But HMRC’s view on employment status doesn’t.
Getting the freelancer vs. employee question right is one of the simplest ways to protect your agency from painful tax surprises and to build a healthier, more transparent relationship with your team and contributors.
If you want help reviewing a freelancer arrangement or getting clarity on IR35, PAYE, or employment status, why not book a meeting.