IR35: Why contractors should have business insurance

The government’s private sector IR35 reforms came into effect on 6th April 2021. If you’re a contractor operating through a personal service company, you’ll still need to be sure you’re aware of your new responsibilities.

Of course, if you’re genuinely operating outside of IR35 then there’s no cause for concern, you’ll simply need to be able to demonstrate it when required. Our IR35 Calculator can give you a free instant assessment of your assignment for your IR35 status. 

You can then purchase a detailed report with conclusions and recommendations which can be used to show you’ve taken reasonable steps to assess your IR35 status. We can even offer a review of your assignment contract by an expert accountant for that extra peace of mind.

Operating as a business in its own right

An important part of showing that you’re working outside IR35 is to demonstrate that you’re providing services as a business in its own right and not as an employee.

Holding the correct small business insurance is a helpful indicator of operating as a business which can help show you are working outside of IR35. Holding business insurance can help demonstrate that you’re taking on contractual risks and liabilities and you’re taking steps to protect yourself.

Setting yourself apart from employees

Having the correct insurance cover in place is one of the differences between a contractor and an employee. Holding public liability insurance is simply not a requirement for an employee as they would be covered by their employer’s own provisions. Therefore, holding insurance is one of the factors that can help differentiate you from an employee.

There are also some other factors to consider. The taking on or presence of financial risk is another indicator of working outside IR35. The fact that you, as the PSC, have had to purchase professional indemnity insurance demonstrates a financial obligation and a responsibility to protect your interests.

Ensure you have the correct cover for your needs

Crunch partnered with Qdos, a leading provider of contractor insurance, to offer tailored packages for contractors.

Most businesses using contractors would insist on them having professional indemnity and public liability cover in place as standard and we’d certainly recommend PSC contractors hold appropriate insurance. It’s good business practice to ensure that you’re taking responsibility for your work and actions and it protects you should anything unforeseen go wrong.

Organising your cover is quick and easy, but it still makes sense to act sooner rather than later, remember insurance won’t cover you retrospectively, so you need to have the right insurance in place as soon as you need it.

If you’re in the private sector and need any further support with IR35, check out our “Getting your contracting business ready for IR35 in the private sector” for more information.

If you have any questions about business insurance, or you think you may not currently have the right cover in place, you can talk to our insurance partner – Qdos. You can contact them by phone or using our online form, all the details are on our small business insurance page.

Thinking about Life Cover, too?

We’ve partnered with Seico to offer advice on all types of Life Cover. You can call them on 0330 057 3948 and they’ll be able to offer individual advice on the best type of cover for you.