IR35 Insurance as business expense

[manstein]

Hi all,

I am considering taking out QDOS's TLC35 insurance, which I believe will cover my tax bill should I be found to be caught by IR35. I have searched the web high and low about whether I can offset the full cost of this as a business insurance against my corporation tax bill or does this money come out of my own pocket?

If it is a wholly refundable expense I can't understand why everyone wouldn't have it, as you're getting it for free?

Or is there something I'm not seeing, I just don't want to claim an expense for something that may not be allowable and draw attention to myself.

Has anyone any advice to offer on this, from either personal or professional experience?

Cheers

[chris79]

You don't get it for free.

Your account balance is £10,000.

You pay £500 for insurance leaving £9500 in your account.

You then pay 21% corporation tax on this £9500 (your company profit).

It is not 100% paid from corporation tax, this is a common misconception that many people seem to have. In real terms you basically get it 'tax free', so you save ~21%.


I worked with a colleague who was with an umbrella and said he was claiming £200 a week in petrol, he actually thought he was £200 better off every week and that doing more miles made him rich. Even after explaining to him how it worked he still thought he was better off doing lots of miles and that it was a license to print money.

[expat]

Hi all,

I am considering taking out QDOS's TLC35 insurance, which I believe will cover my tax bill should I be found to be caught by IR35. I have searched the web high and low about whether I can offset the full cost of this as a business insurance against my corporation tax bill or does this money come out of my own pocket?

If it is a wholly refundable expense I can't understand why everyone wouldn't have it, as you're getting it for free?

Or is there something I'm not seeing, I just don't want to claim an expense for something that may not be allowable and draw attention to myself.

Has anyone any advice to offer on this, from either personal or professional experience?

Cheers

You can't offset anything against tax. All you can do, where allowed, is offset something from the taxable amount.

[expat]

I worked with a colleague who was with an umbrella and said he was claiming £200 a week in petrol, he actually thought he was £200 better off every week and that doing more miles made him rich. Even after explaining to him how it worked he still thought he was better off doing lots of miles and that it was a license to print money.

Where did he think the money came from, the Tooth Fairy? All the money is yours in the first place, you just pay more or less tax on it.

[ratewhore]

Hi all,

I am considering taking out QDOS's TLC35 insurance, which I believe will cover my tax bill should I be found to be caught by IR35. I have searched the web high and low about whether I can offset the full cost of this as a business insurance against my corporation tax bill or does this money come out of my own pocket?

If it is a wholly refundable expense I can't understand why everyone wouldn't have it, as you're getting it for free?

Or is there something I'm not seeing, I just don't want to claim an expense for something that may not be allowable and draw attention to myself.

Has anyone any advice to offer on this, from either personal or professional experience?

Cheers

If you're asking whether you can pay it from the business or not, then the answer is yes. Given that you would not personally need to buy that insurance unless you were running a Ltd Co. I buy mine through my Ltd without a second thought.

All IMHO of course...

[BolshieBastard]

If you're asking whether you can pay it from the business or not, then the answer is yes. Given that you would not personally need to buy that insurance unless you were running a Ltd Co. I buy mine through my Ltd without a second thought.

All IMHO of course...

Exactly. The TLC35 insurance is just like any other business insurance ie PL, PI etc so is an allowable expense.

[TheFaQQer]

If you're asking whether you can pay it from the business or not, then the answer is yes. Given that you would not personally need to buy that insurance unless you were running a Ltd Co. I buy mine through my Ltd without a second thought.

All IMHO of course...

But IR35 is a personal tax, rather than a business tax, so I can understand the question.

That said, I claim mine (and rely on the insurance to pay out if I do anything wrong in an expenses enquiry )

[manstein]

Thanks for the explanations, and I was under the misconception that if I had a corporation tax bill of £10,000 I could say that I had £2,000 of expenses and just give the tax man £8,000.

Now that I think about it it makes perfect sense that it should come out of the gross and I understand it now.

Yes, I was confused that it was an insurance that covered a personal tax so I thought the taxman could argue that because I was personally covering my personal tax bill that it wouldn't be an insurance for my business but, as ratewhore pointed out, unless you had a business you wouldn't need it in the first place.

Thanks again.

[THEPUMA]

It is debatable whether it is allowable or not. The insurance companies normally suggest it is and I think that HMRC have stated that it isn't. I think on balance my opinion is that it isn't.

Broadly, if you incur an expense defending a tax investigation which is ultimately fruitless, then those costs are tax-deductible. On the other hand, if the investigation is successful, the costs are not tax-deductible.

The insurance premium covers both these two scenarios and since there is "duality of purpose", the overall expense is not allowable, in my opinion.

And incidentally, I must correct again those above who are saying that IR35 is a personal tax. It isn't. It is a company liability.

PUMA

[Sausage Surprise]

You don't get it for free.

Your account balance is £10,000.

You pay £500 for insurance leaving £9500 in your account.

You then pay 21% corporation tax on this £9500 (your company profit).

It is not 100% paid from corporation tax, this is a common misconception that many people seem to have. In real terms you basically get it 'tax free', so you save ~21%.


I worked with a colleague who was with an umbrella and said he was claiming £200 a week in petrol, he actually thought he was £200 better off every week and that doing more miles made him rich. Even after explaining to him how it worked he still thought he was better off doing lots of miles and that it was a license to print money.

Ditto, except my colleague was racking up large bills for business lunches and evening meals on the way home