IR35 insurance: what it covers, what voids it
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Status insurance comes in two layers: professional fees cover (defending an HMRC enquiry, from ~£50–£150/yr) and tax liability cover (the tax itself if your status is found wrong — pricier, stricter underwriting). Both are underwritten on one assumption: that your contract and working practice were defensible on day one.
What underwriters check before they'll pay
- A specialist contract review at inception (most policies require one)
- The signed contract matches the actual working practice — mid-term drift voids
- Client-led engagements have a compliant SDS in the file
- No blanket "we ignore IR35" underwriting — the 2017/2021 regimes killed those products
The exclusions that bite
- Known-at-inception risk (you ignored a red flag the review flagged)
- Contracts where the practice contradicted the paper (the most common void)
- Loan-charge-adjacent schemes — nothing covers deliberate disguised remuneration
- Claims on engagements that started before the policy
Do you need it?
If you're outside Chapter 10 (small clients, your own Chapter 8 self-assessment), liability cover is genuinely worth pricing. Inside Chapter 10 the client holds the determination risk, so professional-fees cover is usually enough. Full setup costs and typical premium bands sit in the main insurance guide.
Costs and where to buy
Professional-fees-only cover starts around £50–£120 a year for a single-director IT contractor; adding tax-liability cover multiplies the premium and brings the underwriting scrutiny with it. Buy from a broker who specialises in contractor products rather than a general small-business insurer — the policy wordings differ materially, and the generic versions often exclude status claims entirely. Whatever you buy, the underwriting file (contract review, SDS, working-practice notes) is the asset: keep it per engagement, exactly like the 24-point checklist, because the claim interview happens years later when memories have faded and only documents speak.
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