IR35 and VAT checks when choosing content strategy services

What to take away

How IR35 and VAT affect a UK content engagement

Two quotes can look similar but carry different tax treatment. A freelancer billing through a personal company at £500 a day may be a supplier when judged outside IR35. The same person judged inside IR35 is, for tax purposes, close to an employee of the fee payer.

That single status decision moves employer National Insurance, apprenticeship levy and pension exposure onto the client or agency paying the invoice. It also changes what the contractor keeps. A day rate is not a cost until you know which side of the line it falls.

VAT works the same way from the other direction. A VAT-registered agency adds output tax to the fee, and a VAT-registered client usually reclaims it. A client that cannot reclaim VAT, or a private individual, absorbs the full amount as cost.

For buyers commissioning content strategy services, the headline rate is only part of the decision. The total cost depends on status, VAT and payroll taxes, so finance and legal leads should be involved when comparing agencies and freelancers.

A written scope of work, a status determination and a VAT clause are the three documents that decide the number. Everything else is negotiation. For a wider view of what a fair rate looks like before tax, see our guide to Rate cards or hourly billing.

HMRC off-payroll working rules and who carries the status decision

HM Revenue & Customs (HMRC) is the UK tax authority for VAT, Corporation Tax and the intermediaries legislation known as IR35. The main IR35 provisions are in Part 2 of the Income Tax (Earnings and Pensions) Act 2003: Chapter 8 covers intermediaries and Chapter 10 the off-payroll working rules. VAT is governed by the Value Added Tax Act 1994. HMRC's Check Employment Status for Tax (CEST) tool can help assess employment status, but the decision still depends on the engagement's facts. The department's own guidance sits under HM Revenue & Customs - GOV.UK.

The off-payroll working rules, introduced for the public sector in 2017 and extended to large and medium private sector clients in 2021, moved the status decision away from the contractor's company. For most engagements with a substantial client, the client decides.

That decision is recorded in a Status Determination Statement, usually shortened to SDS. The client must take reasonable care in reaching it, give it to the contractor and the agency in the chain, and operate the resulting payroll treatment.

The chain matters. Where a recruitment agency or a content agency supplies the freelancer, that agency is often the fee payer. The fee payer deducts the deemed employment taxes and pays employer National Insurance.

Small clients are exempt. If the end client qualifies as small under the Companies Act tests, the contractor's own company keeps the status decision, and the older Chapter 8 rules apply. The small-client thresholds are set out below.

HMRC can look back over earlier tax years, so a determination is not a one-off form. Review it when the scope, working pattern or contract length changes. A six-week campaign and a rolling twelve-month retainer are not the same engagement.

The IR35 status tests applied to content strategists and freelancers

HMRC does not publish a single checklist that settles status. Tribunals weigh a set of factors, and the weight shifts with the facts. For content work, six factors do most of the work.

Control. Who decides what is produced, when and how? A strategist who is told which meetings to attend, which tools to use and how to present work looks supervised. A specialist brought in for an outcome, left to choose the method, looks like a supplier.

Substitution. Can the contractor send someone else? A genuine, unfettered right to substitute points outside IR35. A clause that requires the client to approve any substitute, or that names one individual, weakens it sharply.

Mutuality of obligation. Is the client obliged to offer work, and the contractor obliged to accept it? A rolling retainer with set hours looks like employment. Project work with no commitment beyond delivery does not.

Financial risk. Does the contractor carry risk? Fixed-price projects, own equipment, own insurance and unpaid correction of faulty work all point to business. Hourly billing with no risk of loss points the other way.

Integration. Does the contractor appear as part of the team? A named email address, a place on the org chart, attendance at internal-only training and a staff discount card are all evidence of integration.

Exclusivity and length. Several concurrent clients support self-employment. One client, full time, for years, does not.

Apply the tests to the actual working pattern, not the contract wording alone. Tribunals look at what happens in practice, and a contract that describes a supplier relationship while the reality is supervision will not save the position. Here is how the factors usually fall for common content roles.

Small company exemptions and end-client responsibilities

A client is small for off-payroll purposes if it meets two of three thresholds. These apply in its own right or as a group. The thresholds are annual turnover of no more than £10.2 million, a balance sheet total of no more than £5.1 million, and no more than 50 employees.

Unincorporated clients, such as partnerships and sole traders, are treated as small unless they are connected to a larger entity. Most charities and many owner-managed marketing teams fall into this group.

If the client is small, the contractor's own company decides status. That is the position that applied to all private sector engagements before 2021, and it still applies to a large share of UK content work.

If the client is medium or large, the client must issue an SDS and operate PAYE where the determination is inside IR35. The client also has to deal with disagreements through a status disagreement process, and respond within 45 days.

Agencies in the middle carry real exposure. If the end client fails to give an SDS, the agency as fee payer generally has to decide status itself. Getting that wrong means the agency owes the tax, not the client.

Due diligence is cheap next to that risk. Check the client's latest accounts at Companies House before quoting, and keep the evidence. Where a determination is disputed, the paper trail is the defence. Our note on costs and pricing covers how this exposure is priced into quotes.

VAT treatment of content strategy services and agency fees

VAT is charged on most content and marketing services supplied in the UK. The standard rate is 20 per cent, with reduced and zero rates applying to specific goods and services that rarely touch content work. The current rates are set out under VAT rates - GOV.UK.

Registration is compulsory once taxable turnover passes the threshold in any rolling twelve-month period. Many freelancers and small agencies register voluntarily to reclaim input VAT on equipment and subcontractors.

A VAT-registered agency charges VAT on top of its fee. The invoice must show the VAT number, the rate, the amount of VAT and the total. An invoice without those details is not a valid VAT invoice, and the client cannot reclaim.

Agency fees are treated as consideration for the service supplied, not as a disbursement, unless the agency is acting as a disclosed agent buying in the client's name. Media spend is the classic example, and the treatment is often negotiated. Content strategy, copywriting, design and account management are the agency's own supply and are VATable in full.

Where an agency subcontracts to a freelancer, the freelancer charges VAT to the agency if registered. The agency then charges its own VAT to the client. Two VAT charges arise, and both are normally recoverable by VAT-registered parties.

Cash flow catches people out. VAT collected is not the agency's money, and it is due to HMRC whether or not the client has paid. Quarterly returns and Making Tax Digital compatible records are the baseline. Our checklist on hidden costs flags the ones that surprise buyers.

Place of supply, reverse charge and overseas clients

The country whose VAT applies is determined by the place of supply rules. For business-to-business services, the general rule puts the supply where the customer belongs. HMRC sets out the place-of-supply rules in VAT Notice 741A, Place of supply of services. That means a UK agency serving a German brand does not charge UK VAT.

The customer accounts for the VAT under the reverse charge. A UK business buying services from an overseas supplier applies the same mechanism, reporting the VAT on its return and usually reclaiming it in the same period.

So the reverse charge VAT marketing buyers see on invoices is not extra cost for a fully taxable UK business. It is a reporting entry. For a partially exempt business, such as some financial services clients, the recovered amount may be limited.

Business-to-consumer supplies sit where the supplier belongs, so a UK agency charges UK VAT to a private individual abroad. Digital services to consumers follow different rules based on the customer's location.

Overseas clients still raise IR35 questions. The off-payroll rules apply to UK end clients and to work performed in the UK. A contractor working for a US client from a UK base is generally outside the off-payroll regime, but the contractor's own company must still apply Chapter 8 IR35 to its contracts.

Currency adds a layer. Invoice in sterling where possible, and state the exchange basis. An overseas client that cannot reclaim UK VAT is price-sensitive, and the difference between VAT-inclusive and VAT-exclusive quotes is often the whole margin.

Employer National Insurance and Corporation Tax effects on pricing

Employer National Insurance is charged on earnings above the secondary threshold, at the rate set for the tax year. From 6 April 2025, the standard employer NIC rate is 15.0% and the secondary threshold is £5,000; the 2025 changes set out both figures.

This is the cost that makes an inside-IR35 engagement more expensive than the day rate suggests. The fee payer owes employer NIC on the deemed employment income, plus apprenticeship levy where it applies, and must account for it through payroll.

Agencies that employ staff directly pay the same charge on salaries. That is why an employed strategist and a limited company contractor outside IR35 can be quoted at similar rates while costing the agency very different amounts.

Where an engagement falls inside IR35, the practical answer is often to reduce the gross fee so the total cost stays constant. The contractor bears the shortfall. Negotiate that before work starts, not after the first payslip.

Corporation Tax applies to the agency's profits, not its turnover. Rates depend on profit levels and the marginal relief that smooths the step between them. The current rates and reliefs are published under Corporation Tax rates, expenses and reliefs: Rates - GOV.UK.

A limited company contractor pays Corporation Tax on profit and then tax on dividends taken out. That combination, not the day rate alone, determines take-home pay. Buyers comparing a limited company quote with an umbrella quote are comparing different tax bases, and the comparison only works after tax.

Contract clauses that keep IR35 and VAT positions defensible

Contracts do not decide status, but they are the first evidence a tribunal or HMRC compliance officer reads. Weak wording invites a challenge even when the working reality is sound.

Work through them in order:

Get the sequence right and the engagement is defensible. Get it wrong and the tax can land years later, on the party least able to absorb it. Our guide to commercial contracts sets out the wider terms that belong alongside these clauses.

Common questions