The importance of renewing your IR35 insurance policy

IR35 insurance and Legal Expenses has become a regular part of business insurance for many contractors since the introduction of legislative reforms in April 2021. Historically, contractors have protected their own IR35 status with insurance, but since the reforms, supply chains now frequently require contractors to hold these types of insurances.

However, with the changes nearly a year old now, some contractors may be wondering if they need to renew it and if it’s really worth holding. In this article, we’re giving you the lowdown on why it’s important to maintain your legal expenses and IR35 insurance to mitigate risk and make yourself more desirable to current and potential clients.

What is IR35 insurance?

Typically, a good IR35 insurance policy will cover you for taxes, interest and penalties incurred in an IR35 investigation, as well as legal and professional fees to cover the cost of your defence. They can be bundled with legal expenses insurance too, covering you for things such as tax, PAYE and National Insurance Contribution (NIC) investigations, contract disputes, identity theft, personal injury, debt recovery, and jury service. You should always check the details of an IR35 insurance policy to make sure you’re happy that it includes everything you need it to.

Traditionally, IR35 insurance policies only cover the policyholder for IR35 investigations.

Why should contractors hold IR35 insurance?

By taking out or renewing IR35 insurance and Legal Expenses, you’re protecting yourself. Although the reforms shifted the responsibility to end-clients and the liability to fee payers, there are still some circumstances where both lie with you, the contractor. These are usually related to the size or location of your client’s business:

• Your client is a small business: The IR35 reforms only apply to medium or large clients. If your client is a small business then you still hold the liability. To be considered a small business your client must satisfy at least two of the following:
  1. An annual turnover of no more than £10.2 million;
  2. No more than £5.1 million on their balance sheet;
  3. No more than an average of 50 employees during the tax year.
• Your client is based overseas: If your end-client is based overseas and has no connections to the UK (no Permanent Establishment) then IR35 responsibility and liability reverts to you.
• You are a non-UK resident: If you’re a non-UK resident and working abroad then you do not have to consider IR35 at all.

What is Legal Expenses cover?

A Legal Expenses policy for contractor insurance will typically cover the legal defence and professional fees for tax, PAYE and NIC investigations, contract disputes and personal injury claims. The cost of a legal case can really do damage to your finances, so Legal Expenses cover can give you peace of mind.

IR35 Protect and Legal Expenses from Kingsbridge

If you’re looking to purchase or renew your IR35 insurance, it’s worth taking a look at Kingsbridge’s IR35 Protect cover. It includes Legal Expenses cover as standard and covers you for up to up to £100,000 in taxes, interest and penalties resulting from an HMRC investigation. The policy flexes to cover the liable party, whether that’s you, your end-client or recruitment agency.

If you opt for the IR35 Protect Premium package, you also get unlimited use of the Kingsbridge IR35 Status Tool for the duration of your policy. This allows you to determine your status quickly and accurately by answering some carefully crafted questions. If your result is borderline, it even goes to one of our specialists for a manual review, giving you and your end-client confidence in your status determination. In addition, if you receive an outside determination via the tool and you hold IR35 insurance, we will automatically defend you if HMRC investigates.

In addition, our Legal Expenses policy provides cover for up to £100,000 in IR35 status enquiry defence costs. Legal Expenses also includes:

• Contract disputes, which will assist when you are negotiating legal rights for the purchase or provision of goods or services.
• Jury attendance cover for loss of salary and wages whilst off work to attend a court for jury service.
• Debt recovery to provide assistance in recovering money owed, in the event that you aren’t paid for the sale or provision of goods and services.
• Identity theft which covers the necessary legal expenses and ancillary costs incurred following the event of personal identity theft.
• Personal injury, which will cover the costs and expenses for both you and your family members’ legal rights following an accident resulting in bodily injury.

For more information on IR35 Protect and Legal Expenses, to get a quote, or to renew, you can contact our friendly team of contractor insurance experts today.