As most of our readers will be aware, individuals who are caught by IR35 will be significantly worse off than those whose contracts are not deemed to be caught by the tax rules.
Why would you need IR35 insurance cover
IR35 was created to tackle ‘disguised employment’ – whereby a contractor would ordinarily be taxed as a normal employee were it not for the existence of a limited company.
HMRC can determine whether or not a contract represents ‘disguised employment’ based on a number of criteria, including employment status rules as well as a growing number of Court rulings and precedents.
Understandably, many contractors may wish to take out IR35 insurance (which is often referred to as ‘tax investigation insurance’) to cover them in the event of a status challenge by HMRC.
Over the past 18+ years since IR35 became law, a number of established products and services have become available to contractors to cover the costs of a tax investigation, and even to cover the tax and national insurance liabilities you may subsequently be found to owe following an HMRC enquiry.
One of the leading providers of IR35-related cover is Qdos who offer two ground breaking products:
1. Tax Enquiry Insurance (IR35 Insurance)
The bulk of IR35 enquiries start with a PAYE compliance visit or an enquiry from a tax return and could possibly end up at a Commissioners’ Hearing. For this reason Qdos offers Freelancer Tax Protection, affording total peace of mind in the event of a PAYE compliance visit or enquiry.
Your case will be handled by an experienced consultant who will deal with all HMRC correspondence from start to finish.
This product covers representation costs of up to £50,000, and can cover previous tax years too (retroactive cover).
All this for a premium of £99 (£8.25 per month) – including Insurance Premium Tax – per year.
2. Tax Liability Cover (TLC35)
Qdos TLC35 covers not only representation costs, but also additional tax, NIC, interest and penalties arising from a HM Revenue & Customs enquiry. This provides contractors with a financial umbrella against the ever-increasing risk of enquiry.
- TLC35 includes unlimited contract reviews.
- All claims are handled by ex-HMRC inspectors.
- Qdos has successfully defended over 1,500 claims.
- This is the most comprehensive IR35 protection product on the market
As well as taking out IR35 cover, we also recommend you submit all contracts to a professional IR35 contract review service (Qdos also provide this).
You should ensure that both the wording of your contracts, plus your working practices (how you carry out your contract work) both demonstrate that you are acting in the manner of a self-employed contractor, not a ‘disguised employee’.