Covered: Health & Safety Executive Fees for Intervention

The inclusion of cover that pays Health & Safety Executive Fees for Intervention (FFI) has attracted positive feedback following the relaunch of our commercial products in the Spring. Here’s some further information about FFI that’s aimed at helping agents explain what the new cover is and how enhances the value of the products. 

Background

• Fee for Intervention (FFI) is a “cost recovery scheme” operated by the Health & Safety Executive (HSE). Under the Health and Safety (Fees) Regulations 2012.    
• Under the Health and Safety (Fees) Regulations 2012, workplaces in ‘material breach’ of health and safety laws are liable for recovery of the HSE’s costs for any inspection, investigation and enforcement action that is undertaken. A ‘material breach’ occurs when the HSE issues a notification of contravention, an improvement or prohibition notice, or a prosecution.
• When criminal proceedings are started, FFI cease and criminal prosecution costs apply. (Note - prosecution costs are not covered by LEI, but the cost of legal representation is).
• From October 1, 2012, the HSE have been able to recover the costs of its interventions from businesses found to be in material breach of the law, even in the absence of a prosecution.
• If the HSE intervenes they are under a legal duty to recover costs in all cases where there is (i) a material breach of health and safety law and (ii) a requirement to rectify the breach is made in writing.
• There does not have to be an incident or prosecution to trigger such HSE involvement

Scope of FFI 

Sectors regulated by the HSE include: factories, mines, schools, fairgrounds, nursing homes, government premises, dentists and doctors’ surgeries. (Other occupations are regulated by  local authorities which do not operate a fee regime).

FFI applies to public and limited companies, partnerships, the Crown and public bodies, and to self-employed people.

It does not apply to:

• Self-employed people who only put themselves at risk
• Employees (Partners are not employees) 
• Work where another HSE fee is already payable (for some or all of that work), e.g. under the Control of Major Accident Hazards Regulations 1999

Other organisations that enforce health and safety law, such as the police or local authorities, will not be able to recover their costs under FFI.

FFI Charges 

Inspection with no action taken: No costs will be recovered
Inspection resulting in an email or letter: £750
Inspection resulting in a notice being issued: £1500

Full investigation: Ranges from approximately £750 through to several thousands of pounds.

HSE will invoice the business and expect payment within 30 days. A complaints process is available allowing businesses to bring a complaint about an invoice and HSE will explain the process when a charge is levied.

ARAG’s position

In our view, FFI are not fines and they have not been introduced as a civil penalty - but solely to support Government policy which requires that service users should pay for the costs of the services they use. HSE policy guidance makes it clear that the purpose of FFI is to recoup costs, and of course exposure to FFI may encourage good H & S practice. The law does not prohibit the use of insurance as a funding mechanism.

FFI could be considered similar to an order for opponents’ costs in a civil case, but the charges relate to internal admin, rather than legal costs incurred. Including indemnity for FFI for commercial policyholders completes a ring of protection by extending indemnity that has always been available for legal costs to appeal H & S enforcements notices, and to defend prosecutions.   

Since data has become available that allowed us to calculate the risk, we were pleased to add FFI cover as part of the May 2018 relaunch of commercial products. 

Notifying claims

We cannot settle FFI invoices until they have been raised, but policyholders should tell us about H & S activity as soon as they are aware that the H & S Exec has identified non-compliance that will incur FFI charges. We may also be dealing with a claim to appeal against an improvement or prohibition notice that relates to the intervention that has resulted in liability for FFI. If that is the case, customers should quote the reference of any claim that relates to the same event. FFI invoices should be sent to us promptly for payment.  

What Every Innovator Needs To Know About R&D Tax Credits

From time to time we receive queries about particular HMRC regulations and whether we cover claims that arise from them under Essential Business Legal and our other commercial products. 

The topic of self-employed contractors, who provide their services through a service company and are subject to “IR35” comes up from time to time. (The answer is “yes”, we will deal with HMRC enquiries and disputes for self- employed contractors provided that the conditions of the policy have been met). Last week, we had a query that hasn’t come up before - about Research & Development (R&D) tax credits. 

If you have clients that engage in innovative projects in science and technology, you may be interested in this. 

About R&D Tax Credits

R&D tax credits can be claimed by companies which have incurred expenditure on innovative projects in science and technology. They can be claimed by a range of companies that seek to research or develop an advance in their field. HMRC define the types of project that qualify for R&D credits. E.G:

• The work must be part of a specific project to make an advance in science or technology.
• It can't be an advance within a social science like economics or a theoretical field like pure mathematics.
• The project must relate to the company's trade - either and existing one, or one that they intend to start up based on the results of the R&D.
• To get R&D relief the business must explain how a project:
• looked for an advance in science and technology
• had to overcome uncertainty
• tried to overcome this uncertainty
• couldn't be easily worked out by a professional in the field

SME R&D relief allows companies with up to 500 employees to:

• deduct an extra 130% of their qualifying costs from their yearly profit, as well as the normal 100% deduction, to make a total 230% deduction
• claim a tax credit if the company is loss making, worth up to 145% of the surrenderable loss

A different significantly less generous scheme applies for larger firms and I‘ve included a link below for more information:

https://www.gov.uk/guidance/corporation-tax-research-and-development-tax-relief-for-small-and-medium-sized-enterprises#how-to-claim-rd-relief

According to a post by one lawyer firm, the HMRC’s large business directorate is challenging more tax relief claims and the sum being disputed in relation to R&D tax credit claims nearly quadrupled in 2017, up from £90m to £425m for large businesses.

Claiming R&D Tax Credits 

Businesses can make a claim for R&D Tax credits when they fill in their Corporation Tax self- assessment return by calculating their expenditure on R&D and supporting their claim with suitable information.

Does Cover Apply If HMRC Challenge R&D Tax Credits Claimed? 

Good news! Essential Business legal will come to the rescue if HMRC investigate the insured’s Corporation Tax self-assessment return and raise a challenge about a tax credit claim provided that fraud has not been alleged of course, and that the return has been submitted to HMRC on time. 

One innovation deserves another. We hope that your innovative clients enjoy the peace of mind provided by our innovative (relaunched) Essential Business Legal and other Commercial legal expenses insurance products!