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IT contractors are to be offered an insurance policy to cover the risk that the government will decide they fit in with IR35 criteria on a particular contract.

This all stems from the High Court decision that the IR35 legislation wasn't illegal but required some extensive work by the government regarding its implementation.

IR35 aims to treat people on short-term contracts as employees of that company, ignoring the fact that IT contractors can work for a range of companies on short-term contracts due to the nature of IT projects.

The rules that the Inland Revenue came up with to decide whether someone is caught in the legislation has been widely criticised and viewed as unworkable. Following the High Court Judge's judgement that cases may have to be looked at individually, opponents of IR35 has pushed the angle that every contract entered into will have to go through some kind of lengthy review. Something, they say, that is completely impractical.

The insurance policy on offer, called Tax Liability Cover 35 (TLC35), will cover the "tax liabilities and penalties that arise if they were to be 'caught' under IR35 by an Inland Revenue challenge". Its has been drawn up with the help of the main body against IR35, the Professional Contractors Group.

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."

The policy has been worked out with Qdos Consulting. If you are a PCG member, the policy will cost £367.50 a year for turnover under £50,000, £393.75 for between £50,000 and £100,000, £420 for £100,00 to £150,000 and £460 to any bastards earning £150,000 to £200,000.

For more information go here. ®

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