In the event of an IR35 enquiry from HMRC, contractors may have to argue their case to show that the rules shouldn’t apply to them. This can be a lengthy and complicated process, which is why IR35 insurance is worth considering.
In this article, we examine Qdos IR35 insurance to understand what it covers and whether it’s suitable for you.
Scroll down for some common FAQs.
What is Qdos IR35 insurance?
Qdos is a specialist tax consultancy with extensive experience dealing with IR35 legislation. Its IR35 insurance provides contractors with expert support in the event of an enquiry and, depending on the policy, cover for professional defence costs or resulting tax liabilities.
Qdos has defended over 1,600 IR35 cases and says more than 50,000 contractors have insured their businesses with one of its IR35 policies.
It offers two main products: Legal Protection Insurance and TLC35 Tax Liability Cover.
You can see the current Qdos IR35 insurance options here.
What is Legal Protection Insurance?
Legal Protection Insurance gives you access to expert representation during HMRC enquiries. Qdos can handle correspondence with HMRC on your behalf and defend your position where a covered enquiry arises.
The policy is aimed at contractors, freelancers and other self-employed professionals and covers the professional costs of dealing with a range of HMRC enquiries.
What’s covered by Legal Protection Insurance?
The policy provides up to £50,000 of professional representation costs for HMRC enquiries including:
- PAYE compliance reviews
- IR35 enquiries
- PAYE or National Insurance disputes
- VAT disputes
- Section 660A disputes
- HMRC aspect and full enquiries
An IR35 contract assessment is also included.
Claims involving HMRC enquiries are handled by Qdos’s specialist tax team.
At the time of writing, Legal Protection Insurance costs £70.50 per year, although prices and policy terms can change.
How does Tax Liability Cover (TLC35) work?
Qdos TLC35 Tax Liability Cover provides broader protection.
As well as covering professional representation during an HMRC enquiry, TLC35 can cover the tax, National Insurance, interest and penalties arising if an IR35 challenge is ultimately unsuccessful, subject to the policy terms and chosen indemnity limit.
Features include:
- Up to £50,000 of defence costs
- Tax, National Insurance, interest and penalties arising from an unsuccessful IR35 enquiry, up to the selected limit
- Unlimited IR35 contract assessments
- Access to Qdos’s specialist tax team
- Optional cover for Section 660A liabilities
IR35 liability cover is available from £25,000 to £250,000.
A £250 excess applies to claims against the tax liability element of the policy, but not to defence costs.
At the time of writing, TLC35 starts from £199 per year.
Who actually carries the IR35 tax risk?
This is important when deciding whether full tax liability insurance is worthwhile.
Under the off-payroll working rules, medium and large private-sector clients and public-sector organisations generally have responsibility for determining a contractor’s IR35 status. Where those rules apply, the contractor’s limited company does not normally carry the PAYE liability in the same way it does under the original IR35 rules.
However, the original IR35 rules still apply where you provide services to a small private-sector client. In those cases, your intermediary – usually your limited company – remains responsible for determining whether IR35 applies and accounting for any tax due.
Historic contracts can also remain relevant.
If you want to understand the distinction between the original IR35 rules and the off-payroll working regime, see the IR35Update guides.
IR35 insurance at a glance
- Legal Protection Insurance: Covers up to £50,000 of professional defence costs for a range of HMRC enquiries and includes an IR35 contract assessment.
- TLC35 Tax Liability Cover: Includes defence costs plus cover for IR35 tax liabilities, National Insurance, interest and penalties, with liability cover available up to £250,000.
Common IR35 insurance FAQs
1. Do I need IR35 insurance if my client is responsible for my IR35 status?
If you provide services solely to medium or large private-sector clients or public-sector organisations under the off-payroll working rules, your company will not normally carry the IR35 tax liability for those engagements.
That doesn’t necessarily mean insurance has no value. HMRC can investigate other areas of your company’s tax affairs, and Legal Protection Insurance covers professional representation for a broader range of HMRC enquiries.
You may have a stronger reason to consider full IR35 tax liability cover if you work for small private-sector clients, because the responsibility for determining IR35 status remains with your intermediary.
You may also have historic exposure relating to earlier engagements where your company was responsible for IR35.
2. Does Qdos insurance protect my company from any other type of tax investigation?
Yes. The professional representation element of Qdos’s tax insurance covers a range of HMRC enquiries in addition to IR35.
These include PAYE compliance reviews, PAYE/NIC disputes, VAT disputes, Managed Service Company (MSC) investigations, Section 660A disputes and HMRC aspect or full enquiries.
The important distinction is that Legal Protection Insurance covers the cost of defending the enquiry. It does not generally pay any resulting tax liability. TLC35 adds liability cover specifically for IR35, with optional Section 660A liability cover.
3. Do I need IR35 insurance if I’m working through an umbrella?
If you’re working through a genuine umbrella company and being paid through PAYE, IR35 isn’t normally relevant to that umbrella engagement because you are already employed and taxed through payroll.
However, HMRC enquiries can relate to earlier limited company contracts, so moving to an umbrella doesn’t necessarily remove historic IR35 exposure.
If you regularly switch between umbrella employment and limited company contracting, whether you need continuing cover will depend on your previous and current engagements.
4. If I shut down my company for good, should I keep my tax enquiry insurance running for a period of time?
Closing a company doesn’t necessarily make historic tax issues disappear immediately.
Qdos policies operate on a claims-made basis, which means the policy normally needs to be active when the claim is made, regardless of when the contract or tax year concerned arose.
Qdos therefore recommends keeping cover in place for a period after you stop contracting or close your company if there is still a possibility of a claim relating to earlier work.
You should check the precise policy terms before cancelling cover, particularly if you’ve had contracts where your company carried the IR35 responsibility.