Can contractors get IR35 Insurance?

A contractor can insure against the costs of professional fees incurred by their company in case of an HMRC investigation into their company. This is useful if the old legislation applies because the contractor's limited company holds the risk.

A basic tenet of insurance law is that you cannot insure someone else's risk. Under the new off-payroll rules, the client or fee-payer holds the risk. Therefore, another party has an insurable interest. Because a contractor, under the new legislation, does not have an insurable interest and does not hold risk, they cannot be asked to insure anyone else.

There is one other type of policy sold in the market, which are tax loss insurance policies. It is essential to be clear that you cannot purchase a tax loss policy hoping to insure against the deliberate non-payment of tax. Further, because of the MSC legislation, if clients or agencies promote tax loss policies to contractors, it could increase the risk for everyone under long-existing laws against tax avoidance. Read more here.

Tax investigation costs policies are standard, don't cost much to buy, and are sensible for all businesses, not just contractors. They typically cover circa £125,000 worth of tax investigation costs.

All IR35 Shield for Contractors members have a Tax Investigation Service included with their membership. For IR35 Shield for Business customers, the Tax Investigation Service is an optional add-on, with fees depending on the level of contractors used in their business.