Due to the nature of the IR35 tax legislation, Can I take an insurance cover?
April 10, 2017
Q: HMRC have made a law against disguised employees in (April 2000) who are operating under a Ltd company. This law is called IR35. The problem is no matter how safe you think you are if case goes to court its just simply your word against theirs. If you represent yourself you will mostly likely lose the case and have to pay out thousands of fines financially crippling you. This is affecting a lot of people and after your own research you will agree that the law is very unjust and not even clear hence I wanted to buy the products listed below. In light of this please advise whether it is permissible in shariah to buy any of the products below from:
(a) Professional Indeminity (if you have this it helps you to stay outside of IR35)
(b) Public and Employers Liability (if you make a mistake at work it helps you pay for it)
(c) Tax Liability cover (all taxes/interests/penalties will be paid if you lose court case if caught inside IR35)
(d) Tax enquiry insurance (if you get investigated the insurer represents you all the way to protect, there is no chance of protecting yourself – it is extremely difficult as HMRC will try there best to “find” something in your contract and work practices in order to fine you and pay backdated taxes)
(e) Full IR35 Contract review
الجواب حامدا ومصليا ومسلما ومنه الصدق والصواب
A:The IR35 tax legislation is designed to combat tax avoidance by employees who try to hide their employee status through an intermediary. The details on who qualifies as an employee can be found at the following link: https://www.gov.uk/employment-status/employee <https://www.gov.uk/employment-status/employee>
However, if the nature of one’s work is such that one’s status remains unclear, one may seek the advice of a competent accountant. In the limited cases where the status of the individual remains unclear even after seeking advice from a competent accountant, one should seek clarification from HMRC directly. If one’s status still remains unclear, one can simply err on the side of caution.
There does not appear to be any justification for resorting some form of insurance cover due to the ambiguity, real or perceived.
Please not that the nature of the business concerned has not been explained in the question. Therefore, only an answer based on principle has been explained.