Contractor Insurance And Professional Status
With recent news regarding PI being the subject of a number of contractor based publications
, we study its nature as a beneficial tool and of course as a protective insurance. As you may have noticed, this is not an article regarding the new film Life of Pi, and anyone wanting to hear anything about it will be sorely disappointed. I am of course talking about PI Insurance, and when recapping over a year of much contractor activity, its importance shines through.
Contractors have been the subject of much discussion and debate this year, and now coming to the end of it, the importance of sufficient business tools become especially apparent. Anyone involved within the contracting sphere will be well aware of IR35 and its changes throughout 2012, and those affected will no doubt understand the benefits of PI insurance. As a policy, PI has a certain amount of bearing regarding a limited company's IR35 position, the insurance acting as a clear representation of professional risk, bolstering a contractor's status as being a business in their own account. Now this has considerable weight should any HMRC enquiry face a limited company contractor, and when looking at the year as a whole, shows to be highly advantageous.
2012 saw changes for contractors from early on, the Business Entity Tests in May marking a clear response by HMRC as a result of the IR35 Forum and the need for a self-calculating system regarding the legislation's boundaries. The tests themselves were met with contempt from contractors however, arguments that the scoring was inaccurate and the actual achievability of being compliant was slim. Regardless of this, the tests themselves marked a clear response from HMRC regarding contractors and their concerns. This involvement from the tax office snowballed, IR35 activity increasing as the weeks went on, the number of enquiries clearly rising. This trend remained constant as the year continued, and with certain changes coming about regarding public sector workers and office holders, the importance of IR35 compliancy was adamant.
Throughout all of this tax commotion, PI Insurance remained a substantial and adequate IR35 tool for contractors, its effects being in place as soon as the policy is purchased. Being primarily a contractor insurance policy targeting the protection of professional indemnity, PI is rarely thought of as an IR35 compliancy indication, and it adds a highly beneficial perk to an already helpful product. Contractor insurance is essential for those working through limited companies, and PI Insurance acts as a double edged sword when considering its benefits when discussing IR35.
IR35 is a very important aspect of the contracting profession, and 2012 has proved that HMRC have an active interest into the professional status of UK limited company contractors. As for next year, the future of IR35 is obviously up in the air, but what does remain constant however are the clear benefits that PI insurance gives.
by: Chris Carvill
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