Off-Payroll (IR35) and Insurance Considerations
With the introduction of the Off-Payroll legislation in April 2020, the contractor is no longer responsible for how they operate and the resulting tax payable. This responsibility will now reside with the client and/or the Fee Payer, which could be the recruitment agency.
This change in responsibility also means a change in who can insure any resulting HMRC investigation or tax liability. If the contractor is no longer the subject of a HMRC investigation, then any indemnity to the agency offered by the contractor, or their insurer, will not work because there is no insurable interest and such an indemnity arrangement will be excluded.
Now and after April 2020, Agencies/Fee Payers provide a professional service to both the client and contractor. This professional service is based upon a duty of care and, after April 2020, verification of the working status, using specialist services such as IR35 Shield. When the decision is made that the role is outside IR35 then insurance is available to the Agency/Fee Payer if they are accused of being negligent in their duty of care.
Most Professional Indemnity policies exclude tax related circumstances, but cover is available under bespoke Professional Indemnity policies and includes investigation costs, fines for late payments and the difference between the amount of tax paid and the amount owed; in this case inside or outside IR35. It is therefore essential that the current insurance policy is reviewed to confirm that coverage is afforded.
Blackmore Borley Limited (BBL), working in conjunction with IR35 Shield, are now able to insure the Agency/Fee Payers’ tax liability if HMRC successfully challenges the original tax status of the contractor/client relationship under the new legislation. This insurance assumes that the verification of the contract was achieved using correct and valid information utilising a verification process, such as IR35 Shield.
Are you already insured?
Many businesses, including IR35 Shield, Agencies/Fee Payers and Umbrella companies already purchase Professional Indemnity Insurance and it is hoped that the above scenario is already covered but please check with your insurer. Alternatively, BBL is happy to review and hopefully confirm that the current insurance arrangements are adequate.
Contact Blackmore Borley
020 7929 4616