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Is IR35 insurance tax deductible?

A client of mine is considering taking out an insurance cover for IR35. More detail can be found here http://shop.qdosconsulting.com/freelancer/products-services/tax-liability-cover-(tlc35).  Would this be tax deductible in the limited company accounts?

 

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21st Aug 2012 07:15

Personally

I would consider that it is a valid business expense in line with PII etc.

 

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By BKD
21st Aug 2012 08:06

I would expect ....

... HMRC to take the same line as they do with other tax enquiry insurance.

However, that other insurance is disallowable because it may cover cases where adjustments are required as a result of fraudulent or negligent conduct. IR35 status is very much a matter of opinion (except in the most blatant cases - but presumably insurance would not be offered in such cases), and I would resist any suggestion by HMRC - on a successful challenge by them - that fraud or negligence is involved where one has considered themselves, and taken appropriate steps, to be non-IR35. Therefore, if the policy is designed to protect against costs of IR35 enquiries only, I'd be pressing for a deduction.

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By BJ
21st Aug 2012 09:56

What about the income?

I was wondering what the position is regarding the compensation payment from the insurer?

My worry would be that it is taxable income. And if so, is the payment in respect of additional tax, interest and penalties grossed up to give the claimant sufficient net compensation to cover the additional payments?

It's worth asking the question. The answers would help you clarify the position regarding the premium.

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