IT contractors 'neglect insurance'

Repeat after me: 'I am not an employee'

By Startups.co.uk, 30th August 2005

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Nearly two-thirds of IT contractors believe they do not need any insurance cover, according to a new study.

Research from JSA, an accountancy firm which specialises in contractors, found an overwhelming attitude among independent IT contractors that they are never likely to run into trouble with tax authorities.

The problem, JSA concluded, is that many of the contractors do not think of themselves as truly independent. At heart they still think like employees.

JSA chief executive Barry Roback said: "Try telling a solicitor or accountant that he doesn't require cover for professional indemnity, public liability equipment or legal expenses, and he will think that you must come from another planet. Why should it be any different for a professional contractor?"

Independent contractors run the risk IR35, tax, PAYE and VAT investigations from HM Revenue and Customs (HMRC) which can end up costing them thousands, according to Roback. What's more, they face non-payment by creditors, data protection, employment disputes and civil and criminal proceedings, for which having proper cover can make less threatening to their business.

"Admittedly, it would be an unlucky person who copped for more than one of these, but the fact remains that in an increasingly litigious society and with a zealous HMRC in hot pursuit of potential offenders, every contractor needs cover for potential legal costs," Roback said.

"It is not really a case of the innocent need not worry. Merely defending your 'innocent' position can prove to be very costly."