FAQs - Fees
- IPSE is much, much more than just tax insurance. As a not-for-profit representative body IPSE works hard on your behalf to make your life as an independent professional much easier and make sure that your way of working is recognised and welcomed.
- IPSE also gives you access to many other benefits such as the money-saving IPSE Advantages and vital business templates
- Oh, and check what's really on offer from others - often the cover isn't quite what it seems and there's an excess to pay if you make a claim. This usually costs more than IPSE Plus membership!
But I've been a member for years, can't you cover me for that final year for free just in case HMRC do come calling?
FAQs - Tax Defence
Over the past three years defence costs have averaged:
- Self Assessment Aspect Enquiries about £2,100 per claim
- Business Records Checks about £1,600 per claim
- Corporation Tax enquiries about £1,100 per claim
- IR35 about £6,600 per claim
And for IPSE Plus members only :
- VAT inspections about £1,100 per claim
- Jury Service about £3,500 per claim
- Agency/Client failure about £4,400 per claim
FAQs - Protection
I've already claimed for Jury service once, but have been called up again. Just my luck! Will IPSE cover a second claim?
- It's cover for things which might interrupt your ability to provide services to your clients. IPSE Plus membership provides cover for Jury service, illness/injury and working time you might need to spend with HMRC or tax experts if you are responding to an investigation covered by IPSE's tax defence.
- If you're unfortunate enough for any of these things to happen, IPSE will compensate you.
What if I need to see the tax man or my IPSE's advisors to discuss an investigation and it has to be during a working day?
FAQs - IPSE Services
IPSE has arranged special deals with providers of professional indemnity insurance and business insurances which your clients may insist you have. We've also arranged special deals with selected Accredited Accountants, who have passed the rigorous IPSE training course for accountants, to offer you bookkeeping and/or accoutancy services. We call them bolt-ons because you can optionally add these to your membership.
FAQs - Tax Investigation
What happens if I am also covered by another tax expense policy, for example through membership of the FSB?
A full Enquiry is when HMRC issues the relevant Notice and asks to see the books and records required to make up the Return or accounts. This may lead to protracted correspondence and the Revenue will be keen to meet with you at some point.
These are generally enquiries into one or two specific entries on the Return whereby confirmation of the information is needed. The assumption is that in general terms the Revenue is happy with your return, but has specific matters (“Aspects”) to clarify with you. If this turns into a full Enquiry, it will be possible for a claim to be made on the full PEI Insurance. Exceptions can be seen in the Summary of cover.
What should I do if I wish to make a complaint about the handling of my investigation under the Policy?
We hope this is not something you will need to do, but should it happen, then you should initially contact IPSE who in turn have been given full details of Markel Tax Protection’s complaints procedure as set out in the IPSE’s Policy.
IPSE standard contractor membership entitles all members to acquire an interest in IPSE’s PEI policy (IPSE Plus membership provides the same for Sch36 Pre-Dispute matters), but does not give members direct rights against the insurer, as it is IPSE’s policy.
Nevertheless, we are comfortable with the level of service that has been provided by Markel Tax and believe that we also have sufficient safeguards in place to ensure that complaints from members will be dealt with efficiently and fairly.
In any event, if IPSE has been unable to resolve any issues relating to the handling of your enquiry with the Markel Tax then IPSE will have no hesitation in complaining to the Financial Conduct Authority, which is the industry regulator for general insurance.
I have heard insurers mention the concept of ‘reasonable prospects of success’, what does this mean?
This applies to disputes where there has to be a reasonable prospect of winning the argument with HMRC. This does not mean that ultimate success is guaranteed, just that there is at least a 50% chance that the argument could be won. To date, Markel Tax have never had to withdraw from a case on these grounds, but if, for example, the matter was a clear case of disguised employment or it was evident that HMRC had raised a VAT assessment correctly, then insurers could not support such a case.
Please note that ‘prospects of success’ does not apply to Plus members who receive a ‘Check of Employer Records’ letter or who are on the receiving end of a Compliance Visit or Business Records Check. These ‘Pre-Dispute’ matters are essentially requests for information and the Plus member is entitled to support in providing the information and the issue of ‘prospects of success’ is simply not relevant.
Is the service available if I submit a contract to HMRC who then advise me that, in their opinion, it fails IR35?
Submitting a contract to HMRC for an opinion does not, by itself, exclude a claim being made under the IPSE Policy. However, the Tax Investigations Service does not extend to a challenge against such an opinion, as it does not constitute a formal investigation into the accounts, which is normally notified by a Notice of Enquiry letter. An opinion of this kind needs to be taken into account and a member is advised to seek professional assistance to ensure that a subsequent challenge could be defended.
If, having received such a response from HMRC the member is subsequently investigated the existence of the previous Revenue opinion will be relevant. Naturally it will be in your interest to demonstrate that you had reasonable grounds for taking a different view from that of HMRC, such as taking corrective action and / or seeking professional advice, as this will be reviewed by Markel Tax under the ‘prospects of success’ clause in IPSE’s policy.
IPSE has a Professional Expenses (Tax Investigations) Insurance (PEI) policy arranged with Markel Tax Protection, which backs IPSE’s Tax Investigations Service that is provided as a membership benefit with Plus members having a greater level of benefit.
When members are under investigation by HM Revenue & Customs for enquiries and disputes which are included in IPSE’s tax representation service, IPSE can make a claim on its PEI policy and a tax investigation specialist from MArkel Tax/Accountax will be appointed to represent you in your case, and the costs that the specialist incurs will not be paid by you.
IPSE Standard members are eligible for the representation service in the following circumstances:
- Income Tax Full Enquiry (All books & records requested by HMRC)
- Income Tax Aspect Enquiry (HMRC just interested in specific entries on the tax return)
- Corporation Tax Full Enquiry (as income tax above, but into your company’s return)
- Corporation Tax Aspect Enquiry (into specific entries on the company’s return)
- VAT Disputes
- Employer Compliance (PAYE/P11D/NIC) Disputes
- IR35 Disputes
IPSE Plus members are eligible for representation for what are termed ‘Pre-dispute matters’; i.e. for requests for information and documentation. These include dealing with:
- Compliance Visits (VAT & PAYE)
- Business Records Checks.
- The ‘Check of Employer Records’ Letters which are the precursor to an IR35 Dispute
Essentially Plus members have representation for checks undertaken by HMRC before the investigations stage, and correct handling of these 'pre-dispute' stages is very important in order to prevent the case from turning into a full-blown, lengthy investigation.
Please note that cases of fraud or criminal investigations are not covered by this service.
I have been supplying a service full time to one client for the last four years. Can a claim be made on the insurance if I am investigated?
Yes a claim can be made because the length of an engagement is not the determining factor for IR35; it is whether the key issues of personal service, control and mutuality of obligations point towards or away from a contract of employment.
Can a claim be made on my behalf if, once an investigation has started, my IPSE membership comes up for renewal and I do not renew it?
If you have Plus membership, then a claim can be made so that you have representation in connection with what are often termed as ‘Pre-Dispute Enquiries’. These comprise PAYE or VAT Visits, Business Records Checks or any queries raised under what is known as Schedule36 of the 2008 Finance Act. This not only gives HMRC the authority to undertake the Compliance Visits and Business Records Checks, but also allows the Revenue to request information and inspect documents (including from 3rd parties) in connection with your business and personal affairs.
It is worth stressing that this is the same legislation which allows HMRC to issue the ‘Check of Employer Records’ letters, the responses to which will determine whether HMRC will progress with a full blown IR35 investigation. All the more reason for getting specialist representation and all the more reason for having Plus membership.
No, the service only extends to full legal members of IPSE, but the service will extend to the legal member's spouse or co-habiting partner if he/she is an employee of the contractor's company - provided the spouse/partner is not also a contractor working through the company as an employee or director. If there are other contracting directors in the company who are not members of IPSE, the service will not extend to those individuals but it will apportion the costs of the company enquiry and pay the proportion that relates to the IPSE member (assuming that the claim has been accepted).
The service will not extend to an enquiry into any business interests that the spouse/co-habiting partner may have outside of the contracting company.
No, IPSE’s policy only covers the professional costs of dealing with an investigation. These are the fees of the appointed specialist tax consultants, but may, at the discretion of the Insurer (see previous FAQ), also include any necessary costs of your Accountant. Such costs will include the gathering of necessary information to answer the HMRC's queries and representing you at a hearing with the Commissioners. It does not cover any taxes or fines levied if your appeal is unsuccessful.
It is possible to buy insurance cover against having to pay additional tax or fines imposed by HMRC.
A number of IPSE Affiliates offer such insurances including Markel Tax Protection. There are other Affiliates who offer a Guarantee such as Accountax.
In order to insure against these potential tax losses, you will need to have your contract(s) reviewed. In addition to its own reviews Markel Tax will also insure contract reviews undertaken by most of the specialists in this area including Accountax and Lawspeed. You can find contact details for these companies in the IPSE Supplier Directory section of this website.
It is at IPSE’s discretion whether a claim will be made under its Policy for any business activities outside of the contractor's principal contracting/consulting business. If a full legal member of IPSE has two companies, one for contracting/consulting and one for something else, then the service only extends to the contracting/consulting business. Nevertheless, the Insurer has declared that they will consider a claim made by IPSE on behalf of a member under the Policy provided that:
- the member's principal contracting/consulting business comprises more than 50% of the overall annual business income, and
- annual turnover derived from the second unrelated business stream does not exceed £100,000.
The reason for these distinctions is that the Insurer has to make certain assumptions about the nature of the risks involved. These risks could change if members had significant levels of business income that arise from businesses that operate in a totally different business and tax environment. If these limits are exceeded then there is no cover under the Policy, however the Insurer will apportion the costs of the overall enquiry and pay those (assuming that the claim has been accepted). Consideration may also be given to reimbursing some of the costs incurred relating to that extra element to the claim.
The IPSE Tax Investigation Insurance policy is a group policy taken out by IPSE on behalf of its members. The group policy runs from 1 Jan to 31 December annually, and the Service Summary shows the expiry date of the policy as 31 December. The IPSE group policy with the insurers has been renewed to cover until 31 December each year, and you can read and print the updated service summary.
It is IPSE's aim to maintain this policy and effect a renewal each year. However, IPSE cannot guarantee that the terms or benefits under the Policy of Insurance will remain unchanged throughout the period of your IPSE membership – and indeed the benefits for both plus and standard members have been increased several times in the last 10 years!
This is a ‘representational service, which will only pay for the fees incurred by a specialist from Markel Tax or Accountax to deal with the enquiry. However, we do recognise that there are occasions where only the accountant has the information needed to answer a specific query and the appointed consultant will contact your accountant to agree a fee that insurers will pay your accountant to provide that information.
If you choose to ask your accountant to deal with the matter from start to finish, then you will not be able to benefit from the IPSE’s representation service.
One of the principles of insurance is that the claimant should not suffer any loss and so there are occasions where Insurers will pay the VAT on the cost of a claim. There are two examples where this could apply to a Freelancer:
- If you are on the VAT Flat Rate Scheme, i.e. your VAT payments are based on a percentage of turnover, then any VAT incurred is a cost and cannot be reclaimed.
- If your turnover is below the VAT threshold and you are not charging VAT, you will not be able to recover the VAT on any of your outgoings.
In both of these cases, the insurance will pay the gross value of any claim. You are able to identify whether you are on the Flat Rate Scheme or not VAT registered at the time you make a claim.
If neither of these applies, then you must pay the VAT element of the cost of the claim and include it in your next quarterly return so that you can claim the VAT back from HMRC in the usual way. Therefore, you do not suffer any financial loss.
Yes, the member’s personal tax affairs are covered. However, please note that where you have rental income in excess of £50,000 p.a. , then this should be treated as a separate business. Please also see the next question relating to other business interests.
Immediately. As soon as you receive notice from the investigating authority that you are to be investigated, you must notify IPSE immediately and certainly within the period of insurance. Normally such a letter will notify both you and your accountant of the intention to investigate and will mention that the enquiry is taking place under Section 24(1) Schedule 18 Finance Act 1998 (for Limited Companies), Section 12AC of the Taxes Management Act 1970 (for Partnerships) or Section 9A of the TMA 1970 (for sole traders and Individuals). Notification is made by contacting IPSE.
The importance of making the claim as soon as you receive notification is even more important now that HMRC are operating within very defined and limited time limits. This is particularly the case where you receive a ‘Check of Employer Records’ letter, which is the precursor to an IR35 Dispute. Please note that the policy specifically provides for the IPSE’s appointed claims handlers to deal with these (and other) enquiries; therefore you may invalidate the Cover if you ask your own accountant to deal with the enquiry.
In the case of a VAT dispute, any letter sent to you by HMRC following an inspection, which expresses dissatisfaction with your records, should be notified to IPSE. If in doubt, please ring the tax helpline to make sure that you get the most out of your IPSE membership. The same approach should be taken following an Employer Compliance Visit- if you have IPSE Plus membership, you should notify IPSE immediately when you become aware of an Employer Compliance, VAT or any other visit including a Business Records Check, as Plus membership extends the protection to the Pre-Dispute phase. That also means that Plus members have representation in order to respond to the ‘Check of Employer Records’ letters which announce the first phase of an IR35 review.
If you have any queries, or are unsure whether your circumstances constitute a claimable event, then if you are a IPSE member you can telephone the Tax Helpline. A Tax specialist will then advise you on your situation and the next steps you should take.
Please remember that IPSE’s policy provides for representation by investigations specialists and so if you incur professional costs before advising IPSE, then not only are insurers NOT liable for those costs, but you could be missing out on best representation.