Limited company owners, particularly contractors, who want to protect themselves in the event of an HMRC status enquiry may decide to take out tax investigation cover. This is sometimes referred to as ‘IR35 Insurance’. Qdos Consulting is one of the leading providers of this type of policy.
Although the number of HMRC IR35 enquiries which have taken place over the past five years remains surprisingly low, for those businesses that are targeted for inspection, the costs of seeking professional representation, together with any backdated claims for tax, can be significant.
Given that IR35 insurance cover is very affordable, it can offer peace of mind without breaking the bank.
Tax investigation cover is widely available, and several insurance firms offer cover tailor-made for contractors and freelancers.
Two types of policy are generally available – one which will cover the costs of representation, and another which will cover professional fees, together with any additional income tax, National Insurance Contributions, penalties and interest which may be applied following an IR35 enquiry.
Although referred to as ‘IR35 insurance’ within the contracting industry, you will also be covered for the costs of defending your case in the event of a wider number of HMRC enquiries and disputes, including a VAT or PAYE/NIC dispute, and an HMRC aspect or full enquiry.
Qdos / IR35 Insurance
One of the leading suppliers of contractor insurance products is Qdos Contractor.
The company, which has provided specialist products since IR35 became law, offers two products: ‘Freelancer Tax Protection’, which covers contractors for the cost of professional representation, and TLC35 which covers these costs together with up to £100,000 of backdated tax liabilities if they are deemed to be owed.
Seb Maley from Qdos explains why contractors may benefit from taking out IR35 insurance cover:
“Qdos’ Tax Liability Cover (TLC35) insurance covers all representation in respect of any HMRC review or enquiry. We will represent you from the outset, so would attend the initial Employer Compliance Review on your behalf. If you are subject to a fully blown IR35 enquiry, you can be safe in the knowledge that you have one of the UK’s most experienced status experts fighting your corner.”
“If the worst were to happen and HMRC ultimately deemed that you were caught by IR35, the TLC35 policy will also cover all resultant tax, interest and penalties, affording you total peace of mind.”
Alongside TLC35 which costs from £360 p.a., the company also offers ‘Freelancer Tax Protection’ (currently £99p.a.), which will also cover the costs of professional representation in the event of an HMRC enquiry, but not any further costs.
You can find out more about each type of policy on the Qdos site.
Alternatively for further reading on IR35 insurance click here.