IR35 Insurance

[KennyG]

I see companies such as Bauer & Cottrell and Lawspeed offering a service whereby if you pass their IR35 review (which you pay for) and are deemed to be outwith IR35, this can be backed up with IR35 insurance. Any thoughts on this? In theory it sounds like a few hundred well spent but would you be able to properly claim against these policies if the Revenue went after you?

[malvolio]

Doesn't offer anything that PCG Plus membership doesn't for £200-odd apart from the review, which you can get discounts on anyway.

But make sure you are comparing like-for-like since some of these work on a per contract basis, so you have to maintain the cover for up to six years. Gut feel is to use PCG for the ongoing PEI insurance and get contracts vetted as needed, but I would welcome other views.

[Denny]

I see companies such as Bauer & Cottrell and Lawspeed offering a service whereby if you pass their IR35 review (which you pay for) and are deemed to be outwith IR35, this can be backed up with IR35 insurance. Any thoughts on this? In theory it sounds like a few hundred well spent but would you be able to properly claim against these policies if the Revenue went after you?

You could only claim if you made reasonable steps to ensure your contract terms and on-site working practices were negotiated as being outside to begin with and during the contract. Having the contract checked by B&C or Qdos etc is not enough, nor is opting out of the agency regulations. You would have had to discuss working practices with the client during the interview and carry these through during the assignment and still lose in the event of an investigation.

If you know full well the IR35 working practices are being compromised during the contract and you stay anyway to finish it then I doubt they would pay up. The IR are bound to use the client to EB contract to make their case and so it is imperative that you use this to your advantage as it is not seen by you and so you need to demonstate that you negotiated conflicting terms with the hiring manager that may be in this client-EB contract to operate outside any standard clauses the may well stipulate between client and EB that all contractors are the same and have to abide by rules and procudures that make them seem like employees on site. This is particularly important to do because your case could be lost if a judge decides that this secret arragement between cleint and EB carries more weight than all the precautionary steps you took with the EB and client hiring manager to stay outside IR35. The recent case law helps but it does not set a precedent for all contractors. Therefore, the IR will try and win on a case by case basis, knowing full well that they have lost using similar arguments before in similar cases.

Regarding IR35 insurance. It is no different to any kind of insurance so you should treat it with caution and not be too optimistic about them paying out if you know full well you are operating on-site practices inside IR35. If you have medical insurance you are expected to specify any illnesses or bad health habits on your form, irrespective of whether the claim is relevant to these admissions. Same as household insurance. If you keep your windows open or don't have proper locks on the doors, do you think you could make a successful claim against burglary?

Insurance is about risk management, to keep insurance companies in business, it's not to there to provide you with a financial cushion for behaviours and actions contributed to by your own negligence.

[lawspeed]

Survive35 Tax-Safe Insurance

Just to clarify, the Survive35 Tax-Safe insurance underwrites the actual IR35 tax, NIC's, interest and penalties - not merely the representation/defence costs so this does go further than the standard PCG or PCGPlus offerings. The insurer, Abbey Tax Protection, is the same insurer as provides the PCG-PEI and PCGPlus policies.

[Pondlife]

Just to clarify, the Survive35 Tax-Safe insurance underwrites the actual IR35 tax, NIC's, interest and penalties - not merely the representation/defence costs so this does go further than the standard PCG or PCGPlus offerings. The insurer, Abbey Tax Protection, is the same insurer as provides the PCG-PEI and PCGPlus policies.

James, Can you comment on Denny's post above.

What reasons, if any, would you use to justify not paying out if a case was lost. Are there caveats in the T&C of the insurance that would mean that you wouldn't pay if certain conditions weren't met by the contractor.

Are there any clauses surrounding the client to EB contract (which you won't have seen when doing the review)?

Or the actual working conditions of the contractor?

TIA

[lawspeed]

IR35 Insurance

Due to FSA restrictions, it is Abbey Tax Protection that arranges all the insurance paperwork including the policy wording we are unfortunately unable to answer this for them.

[dmini]

My understanding - cos I looked round & asked questions - was that PCG insurance covered the professional costs of the investigation - ie accountants, etc.
The extra insurance that I have ALSO covers the money that Inland revenue could demand from me - in the admittedly unlikely event that I / B&C lost the argument over IR35.
As a mate of mine got a demand from HMRC for £10,000, which he paid, (he didn't try and fight it though), I am happy to pay for the additional insurance. Yes, it's unlikely I would need it, but to be honest that is the purpose of insurance.

[Denny]

James, Can you comment on Denny's post above.

What reasons, if any, would you use to justify not paying out if a case was lost. Are there caveats in the T&C of the insurance that would mean that you wouldn't pay if certain conditions weren't met by the contractor.

Are there any clauses surrounding the client to EB contract (which you won't have seen when doing the review)?

Or the actual working conditions of the contractor?

TIA

You should know by now that the on-site working conditions as well as the contract terms between yourself and the EB are essential components to being outside IR35.

There are a lot of professionals jumping on the contractor bandwagon out to make a quick buck, so don't take everything they say at face value and always keep the entire picture in mind to pay for their value. Otherwise, you might just as well through money down the toilet.

The only way you would get your costs met is if you took all reasonable steps to negotiate up front and stay outside iR35 legitimately during the contract. Othewise, you can be damned sure that the insurance company will use every trick in the book to justify not honouring the claim either to pay the cost of the investigation and the tax owing. - Isn't that what all insurance companies try and do - encourage you to take out a policy, send you a load of small print and then try and get out of paying? Never met an insurance company that hasn't done this yet, have you?

[KennyG]

So this is basically saying that if someone gets their Contract reviewed by the likes of Bauer & Cottrell or Lawspeed and the contract (possibly with changes) passes the IR35 test, and the individual consequently takes out IR35 insurance, there is every likelihood that the Insurance Company will refuse to pay?