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Contractors can insure against IR35 uncertainty

Contractors faced with the uncertainty surrounding the implementation of the controversial IR35 tax can now insure against the risk that the Inland Revenue will disagree with their assessment of their own company's status.25 May 2001

The announcement comes from the Professional Contractors Group (PCG) which was formed in May 1999 to lobby against IR35. The IR35 legislation treats small businesses in the knowledge-based sector as “disguised employees” for tax and NI purposes, thereby preventing them from operating on similar terms to their larger competitors.

A High Court judge recently rejected the claim of the PCG that the IR35 tax is incompatible with the Human Rights Act and European free trade laws. However, the judge was critical of the Inland Revenue's tests for the tax and laid down new guidance to make them more relevant to the knowledge-based sector. The PCG represents 13,000 members who operate their own small businesses, mainly in the IT and engineering sector.

The PCG, working with tax and VAT consultants Qdos has launched "Tax Liability Cover 35" (TLC35), a fully insured policy which insures PCG members’ tax liabilities and penalties that might arise if they are 'caught' under IR35 by an Inland Revenue challenge.

PCG Chairman, Jane Akshar, said:

"Insurance is usually taken out to protect people against the unpredictable, such as burglary, illness and accident. It is ironic that the UK's tax system is now so confusing and unpredictable that small businesses have to take out insurance to protect themselves from the consequences of such uncertainty... TLC35 will help to provide additional certainty to contractors faced by the highly uncertain business environment created by IR35.

"The recent judicial review helped to clarify the situation for some contractors, but there are still unknown factors and evidence of contradictory decisions which prevent contractors planning with any certainty for the future. Like any insurance policy, this product will help to reduce the zone of uncertainty to a more acceptable level."

PCG members receive a discount of £100 on the cost of the policy - the discount is the equivalent of the subscription fee to the PCG. Premiums for members range from £367.50 to £460 per year, according to turnover. In order to be eligible for the insurance Qdos will have to review the contractor's contract to agree their status which will cost an additional £249 plus VAT for the first contract and £150 plus VAT for the subsequent contract.

For further information about the Qdos TLC35 see:

For further information about the PCG see: