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What is IR35 insurance?
Posted Oct 5, 2010
As a result of the financial impact IR35 can have on your income, you may consider taking out IR35 insurance in the event that your employment status is challenged, as the costs of defending yourself can be significant.
What does IR35 insurance cover?
Tax investigation cover provides different levels of cover, depending on the terms of the policy you take out.
This type of insurance will usually cover the costs of professional representation in the even of an employment status enquiry, and may even cover any income tax, national insurance and HMRC penalties which may become due as a result of an unfavourable status enquiry.
Many IR35 enquiries will begin with a PAYE compliance visit. If, as a result, your case is taken further (even ending up at a Commissioners' hearing), you will need to pay for specialist representation - which can be very costly.
Additionally, you may elect to protect yourself in the event that you are found to be caught by IR35 and owe HMRC backdated income tax and national insurance contributions.
Most tax investigation insurance policies cover a wide variety of possible areas of enquiry as well as PAYE, including national insurance and VAT disputes, and full or 'aspect' HMRC enquiries.
Since IR35 became law in 2000, a number of specialist companies have emerged to provide tax investigation cover to contractors.
Specialist IR35 insurance cover
One of the longest established is Qdos Consulting, who provide several specialist tax insurance products:
a) Freelancer Tax Protection - covers your representation costs (up to £50,000) in the event of a PAYE / VAT / IR35, etc. compliance enquiry or visit and costs £117 per year.
b) Tax Liability Cover (TLC35) - covers the representation costs included in the above, and also any tax, national insurance and penalties which may become payable following an HMRC enquiry. Costs from £355 per year.
You can find out more about these products here.
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