Company Insurance requirements (IR35)

[swebb]

Hi there,

Just need some info about insurance for a company I have just started via the PCG. I'm trying to cover myself against IR35. I've checked my contract for IR35 (its actually using the PCG A06-05 template) but I'm a little confused about the impact company insurance has with regards to this. Am I right in thinking that having both employers and public liability insurance is there way to go ? I notice on this site that this can be obtained for £112pa, is this a good deal ?

Any other tips on other insurance that should be considered.

Sorry for the questions as I'm still a novice at the director game and I'm currently sitting to the left of so many documents that need reading I feel like I've just stumbled into a legal minefield

Cheers

Steve

[Gonzo]

Hi there,

Just need some info about insurance for a company I have just started via the PCG. I'm trying to cover myself against IR35. I've checked my contract for IR35 (its actually using the PCG A06-05 template) but I'm a little confused about the impact company insurance has with regards to this. Am I right in thinking that having both employers and public liability insurance is there way to go ? I notice on this site that this can be obtained for £112pa, is this a good deal ?

Any other tips on other insurance that should be considered.

Sorry for the questions as I'm still a novice at the director game and I'm currently sitting to the left of so many documents that need reading I feel like I've just stumbled into a legal minefield

Cheers

Steve

What IR35 risk are you intending to insure? -

A. The professional fees you will need to incur if you are investigated, or
B. The additional tax that you have to pay if you are judged to be inside?

Employers and public liability insurance will not help with either of those. They used to be compulsory, but I think that Employer's liability cover is no longer necessary if you do not have any employees.

PCG membership will help with A, although I do have additional cover of my own in the event of any legal dispute.

B you will need to go to someone like QDOS consulting*. There are many (including myself) that would argue that this cover is a waste of money, although others would argue that it helps them sleep at night.

There is some useful info here:

http://www.pcg.org.uk/cms/index.php?...915&Itemid=391

Usual disclaimer - I am not a Lawyer or and Accountant.

*Other tax insurance schemes may be available.

[swebb]

Thanks for the reply Gonzo.

I was actually more concerned that having the insurance would help during an IR35 investigation to imply I was actually running as a company and not an employee.

I realize that the liability insurance is no longer required however surely if my contract has a substitution clause then my company is not a one man band and must have employees liability. Well that's they way I understood it anyway. If I don't have the insurance and get investigated couldn't the revenue us this against me and argue I was an employee ?

As I say this is all new to me so I might be adding 1+1 and making 3

Cheers

Steve

[SueEllen]

The revenue is not interested in your insurances or how you advertise your company. They are interested in your individual working practises.

If you use the search button you will find links to other threads on IR35 which contain links to legal cases. (I'm not doing this for you as it isn't hard. If I managed to search for and find the links then it can't be the holy grail.)

Employers liability insurance is not needed if you don't have any employees apart from yourself. If and when you do use your substitution clause and get an employee not a subcontractor, then you will have to ensure you have the insurance in place.

Gonzo has already pointed you to useful links so I suggest you read them properly.

[swebb]

Thanks for the reply SueEllen. I did follow the link that Gonzo included and on that page it said

"As a freelance consultant or contractor operating outside IR35, however, you are likely to have a substitution clause in your contracts. Without employers’ liability insurance, you cannot fulfil this clause without breaking the law, so in practice you ought to have cover."

As you mentioned you don't actually need the insurance until you have an employee but I'm not sure they would see it that way during an investigation, its strikes me as a grey area.

Like you say I need to read up on a few cases I think and also see how the insurance stands concerning subcontractors. I would have thought that using a subscontractor makes little difference to insurance however as my company would be supplying them to the client but I need to confirm this (more reading).

Sorry if these are anoyying questions but i've only just started the company and have a million and one things to read up on and I thought the forum would be a good place to ask questions about one or two of the grey (ambiguous) areas.

Cheers

Steve

[malvolio]

If you get bundled PI/ELI/PLI insurance, as for example through Randell Dorling, the cost of the ELI element is insignficant anyway. For the sake of no more than £75 a year you are covering the business risk that you may have to offer a subbie (which is a Very Good Thing...) but not be allowed to do so for the sake of an arcane bit of legislation. The cost is trivial so just do it.

Insurances make the company legal and better protected, but Hector will take no notice at all: his view is that the whole corporate element is a sham anyway.

Do not run your business in terms of IR35, though, that would be pointless. The rule to remeber is "do not allow the taxpaying tail to wag the fee-earning dog".

Finally, yes you do need to read up, you need to join the PCG (seriously, you do) and pick their collective brains, and you need to learn. But at least you're asking focused questions, unlike some...

[Gonzo]

Thanks for the reply SueEllen. I did follow the link that Gonzo included and on that page it said

"As a freelance consultant or contractor operating outside IR35, however, you are likely to have a substitution clause in your contracts. Without employers’ liability insurance, you cannot fulfil this clause without breaking the law, so in practice you ought to have cover."

As you mentioned you don't actually need the insurance until you have an employee but I'm not sure they would see it that way during an investigation, its strikes me as a grey area.

Like you say I need to read up on a few cases I think and also see how the insurance stands concerning subcontractors. I would have thought that using a subscontractor makes little difference to insurance however as my company would be supplying them to the client but I need to confirm this (more reading).

Sorry if these are anoyying questions but i've only just started the company and have a million and one things to read up on and I thought the forum would be a good place to ask questions about one or two of the grey (ambiguous) areas.

Cheers

Steve

Don't worry, these are targeted questions which is what we like to see.

On the point of having employers liability insurance to help show that you are outside of IR35, I don't think it is going to make any difference.

People have raised the "how could the substitution clause in the contract be anything other than a sham without it" question before, and we end up going around in circles because another contractor could be supplied, not an employee of yourCo.

Contracts and working practices are what you need to get right.

[swebb]

Hi Malvolio and Gonzo,

Thanks again for the replies.

I started up the company through PCG so I'm gradually going though all their bumph as well as the web site. As you say £75 is cheap ! I'll probably get it anyway at that price.

My contract actually follows the PCG template and the agency I'm currently using seem to keep upto date with the PCG info which is good.

Cheers

Steve

[malvolio]

Hi Malvolio and Gonzo,

Thanks again for the replies.

I started up the company through PCG so I'm gradually going though all their bumph as well as the web site. As you say £75 is cheap ! I'll probably get it anyway at that price.

My contract actually follows the PCG template and the agency I'm currently using seem to keep upto date with the PCG info which is good.

Cheers

Steve

If you're using a PCG standard contract and have read the first timer guids and all the rest on their site, then I suggest IR35 is a distant dream...

Follow up question then - why aren't you asking these questions on their fora? The answers you've got from here are right, as it happens, but we're still trying to understand why people don't/won't use the PCG boards, especially for technical issues like these.

[Lewis]

we're still trying to understand why people don't/won't use the PCG boards, especially for technical issues like these.

Some feedback for you. I find them difficult to use due to the design. This forum is so much cleaner and easier to use. Perhaps a re-design would encourage more users. No problem with content.