IR35 Insurance Protection Plan
The IR35 legislation amendment for April 2020 fundamentally means that PSCs (people with significant control) need to be assessed as being inside or outside IR35, to decide whether tax should be deducted at source, or to allow the PSC to pay their own tax.
The agency, as the fee payer, could become liable for unpaid tax, if the contractor is initially paid as being outside IR35, but subsequently found to be inside IR35 after an HMRC investigation.
Agencies need to work in conjunction with hirers, who still have a responsibility to carry out assessments and advise the Agency of the status of the worker before the contract commences.
Marsh Commercial has created a new policy aimed at protecting the agency, by issuing the policy in the name of the agency, on a non-negligent professional indemnity insurance basis.
So what will the policy look like?
- The policy is in the name of the agency and is designed to protect the agency from potential tax liability associated with the change in IR35 legislation
- The policy will be a professional indemnity style cover rather than a legal expenses policy. The disadvantage of a legal expenses policy is that they often contain a no prospect of success clause, which could render the policy useless, leaving the agency exposed.
- The policy is IR35 specific and it is not designed to be a wider legal/tax expenses policy
- The policy will be on a claims made basis (which means the policy would have to be in force at the time of the claim irrespective of the period to which that claim relates to)
- The run-off cover for past liabilities (up-to six years in line with the Legislation) will be made available should your agency choose to stop buying cover going forward
- The policy will include defence costs as well as penalties and tax liability
- The limit of indemnity will be inclusive of defence costs and tax liability and, will be no more than £100k per claimant, subject to a £5M overall limit of cover in the period of insurance
- Suitability for the product will be determined by the insurer.
What information will be need from you?
- An understanding of your current PSC population
- An understanding of end-hirer’s preferred approach to IR35 status determination
- An understanding of your own processes and advice given to end hirer regarding IR35 reviews
- An understanding of an average earning pool and length of contract for your outside IR35 population – which will determine the premium
- An understanding of record keeping and auditing related to the IR35 reviews.
Statements concerning legal, tax or accounting matters should be understood to be general observations based solely on our experience as insurance brokers and risk consultants and should not be relied upon as legal, tax or accounting advice, which we are not authorised to provide.
For more information please get in touch with our Recruitment Team