Two exemptions, and most people reach for the wrong one
The Act catches every employer carrying on business in Great Britain. What gets you out of it is a short closed list, not a general test of whether it seems reasonable.
The two that a small business might be inside are the family one and the owner-employee one, and they interact in a way that costs people money.
The family exemption dies at incorporation
Section 2(2)(a) takes a fixed list of relatives out of the insuring duty: husband, wife, civil partner, parents, grandparents, step-parents, children, grandchildren, step-children, siblings and half-siblings. An uncle is not on it. Neither is a cousin or a nephew.
It also stops applying the moment the business becomes a limited company, and HSE says so directly. The reason is worth holding on to rather than memorising the rule: those relatives are relatives of a person. Once your employer is the company, the company has no mother.
The owner-employee exemption is an AND
A company employing only its owner, where that owner holds 50% or more of the issued share capital, does not need cover. Both halves have to hold, and people remember the shareholding half.
So two co-directors on a 50/50 split are not exempt. The company employs two people rather than only its owner, and the test fails before the shares are looked at. When those two are married to each other, which is the usual version, both apparent escapes are shut: incorporation closed the family one and headcount closed the other.
It is also live rather than permanent. Putting a spouse on the payroll ends it. So does a share transfer that drops you below half. Neither feels like an insurance decision while it is happening.
The 40-year retention duty was repealed in 2008
Nearly every page explaining this still says you must keep certificates for forty years. It was true. Regulation 4(4) of the 1998 Regulations said so, and SI 2008/1765 deleted it with effect from 1 October 2008.
Keep them anyway, and the real reason is better than the rule was. Industrial disease surfaces decades after exposure, a former employee can bring a claim then, and an employer who cannot name the insurer covering that period pays it out of the business. HSE's own wording is that employers without those details risk having to meet the cost themselves.
Broker pages keep quoting the forty years because it sounds enforceable. Once you have changed insurer it stops being their problem either way.
£5 million is the floor and it includes costs
Regulation 3 sets the minimum, in aggregate across all your policies, for any one occurrence. Costs and expenses come out of that figure rather than sitting on top of it, so a claim near the limit eats into the compensation.
Most insurers write £10 million as standard, so the number you have is usually not the number in the Act.
The certificate is a separate duty with a separate fine
Display it where employees can read it. Since 1 October 2008 that can be electronic, provided people know where it is and can get at it. Produce it for an HSE inspector when asked.
Failing either is up to £1,000 and is nothing to do with the £2,500-per-day offence of being uninsured. Offshore is different again: no certificate needed on every installation, but a copy to any employee who asks, within ten days.
Calling somebody self-employed does not answer the question
The duty attaches to anybody working under a contract of service. HSE is blunt that what you call the contract and what their tax status is are largely irrelevant, and that the test is the real nature of the relationship and how much control you have.
Deducting tax and National Insurance, controlling when and how the work is done, supplying the materials, and requiring that person rather than a substitute all point one way. Working for other people, bringing their own kit, and being able to send somebody else point the other.
A CIS subcontractor who only ever works for you, on your materials, to your programme, is where people most often guess wrong.
Exempt is an answer to HSE, not to a procurement form
Being outside the Act means you will not be prosecuted for having no policy. It does not stop anybody suing you, and the liability the policy exists to meet is still yours.
Main contractors and clients ask for a certificate as a matter of routine, and "I am exempt" is rarely the answer their system will take. Cover for a business with nobody to insure is cheap for exactly the reason it is not required.
Common questions
Do I have to keep old certificates for 40 years?
No. Regulation 4(4) of the 1998 Regulations required it once, and SI 2008/1765 removed that duty with effect from 1 October 2008. HSE says it in one line: since that date there has been no legal requirement to keep copies of out-of-date certificates. Keep them anyway, because industrial disease surfaces decades after exposure and an employer who cannot name the insurer for that period meets the claim themselves.
My husband and I are the only two in our limited company. Are we exempt?
No. Two exemptions look like they should apply here, and neither does, which is exactly what catches people out. The family exemption in section 2(2)(a) is disapplied once the business is incorporated, because the employer is now the company and a company has no relatives. The other exemption is for a company employing only its owner, so two people on the payroll fails it before anybody looks at the shareholding. Cover is compulsory.
I am the only director and I own all the shares. Do I need it?
No. A company employing only its owner, where that owner holds 50% or more of the issued share capital, is exempt. Both halves have to hold, so it ends the day you put anybody else on the payroll and it ends if your holding drops below half. Neither of those feels like an insurance decision at the time.
How much cover do I need?
At least £5 million, set by regulation 3, and that figure includes costs and expenses rather than sitting on top of them. In practice most insurers write £10 million as standard, which is why the number people remember is usually the wrong one. It is an aggregate across all your policies for any one occurrence, not a per-employee figure.
What are the fines?
Up to £2,500 for any day on which you are uninsured, and section 5 words it that way deliberately, so a lapse nobody noticed at renewal is one offence per day rather than one offence. Failing to display the certificate, or refusing to produce it for an HSE inspector, is a separate offence at up to £1,000. Where a company offends with the consent, connivance or through the neglect of a director, manager or secretary, that person is guilty as well and can be prosecuted personally.
Do I need it for subcontractors?
It depends on what the arrangement really is, and the label on it settles nothing. HSE is explicit that what you call the contract and what their tax status is are largely irrelevant, and that what matters is the real nature of the relationship and the degree of control you have. A CIS subcontractor who works only for you, on your materials, to your programme, is the case that goes the way people do not expect.
Can I display the certificate on a screen instead of the wall?
Yes, since 1 October 2008. The condition is that employees know where to find it and have reasonable access to it in that form. A PDF on a shared drive nobody has been told about is not display. HSE's own example of where this works is a workplace where everybody uses a computer as part of the job.
Does this cover Northern Ireland?
No. The 1969 Act runs to England, Scotland and Wales. Northern Ireland has its own near-identical order, and the Isle of Man and Channel Islands are separate again. One certificate can serve several of those places, and you have to check each one's requirements rather than assume it does.